Why mortgage rates haven’t risen as expected | Pound Ridge Real Estate

 

By most estimates, mortgage rates were expected to climb this year, with rates on the 30-year fixed-rate mortgage predicted to exceed 5%. Instead, rates are now lower than they were this time in 2013 — much to the advantage of mortgage shoppers.

There are a few reasons why higher rates never came to pass.

Rates on the 30-year fixed-rate mortgage averaged 4.15% for the week ending July 10, according to Freddie Mac’s weekly survey of conforming mortgage rates. A year ago, rates averaged 4.51%.

“In January, we were projecting at the end of the year that the 30-year would be 5.1%,” said Leonard Kiefer, deputy chief economist with Freddie Mac. “We most recently revised that down to 4.4%.

Supply and demand

Economists had largely expected rates to rise once the Federal Reserve indicated it would taper its purchase of mortgage-backed securities through its quantitative easing program, Kiefer said. Rates did, in fact, rise spike upward due to that indication last summer.

But when the Fed actually began purchasing fewer of these securities, mortgage rates began to fall. That’s because the tapering ended up coinciding with a reduction in mortgage originations — which means fewer mortgage-backed securities were being issued, Kiefer said.

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http://finance.yahoo.com/news/why-mortgage-rates-haven-t-145257442.html

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