Homebuyers May Have a Small Window of Opportunity
NEW YORK (MainStreet)--The U.S. Federal Reserve's decision to stand pat on bond purchases may be good news for prospective homebuyers. In the past few months mortgage rates have been creeping higher but have now reversed course and begun to decline.
Fitch, the credit ratings and research company, believes mortgage volume will expand over the near term. Rising rates had begun to weigh on mortgage application volume and lead to a sharp decline in refinancing activity.
"We believe yesterday's Fed announcement will reverse some of these recent trends," says Fitch analyst Rui Pereira in a report. "We expect mortgage interest rates to decline and give a short-term boost to mortgage volume as borrowers look to take advantage of the temporary reprieve." And in fact, mortgage rates have already responded, declining for a second week in a row, with the benchmark 30-year fixed mortgage rate pulling back to 4.66%, according to Bankrate.com's weekly national survey. The average 30-year fixed mortgage has an average of 0.29 discount and origination points.
The typical 15-year fixed mortgage fell to 3.7%, while the larger jumbo 30-year fixed mortgage rate dropped to 4.77%. Adjustable rate mortgages were lower across the board. The popular 5-year adjustable rate sank to 3.55%, while the 10-year ARM retreated to 4.2%."Mortgage rates have been down for two weeks in a row and with the Federal Reserve deciding not to start scaling back their stimulus, this will keep a lid on mortgage rates for the time being," says Kayleen Yates in a Bankrate analysis. "The slow growth economy, high unemployment, and the looming government budget and debt ceiling debates gave the Fed all the cover they needed to hold off on tapering at this point. However, once the tapering inevitably starts, mortgage rates will likely resume the upward climb." That means home buyers might want to take advantage of the Fed's temporary taper delay. Bankrate reports that as recently as May 1st, the average 30-year fixed mortgage rate was 3.52%. At that time, a $200,000 loan would have carried a monthly payment of $900.32. With the average rate currently at 4.66%, the monthly payment for the same size loan would be $1,032.47, a difference of $132 per month.
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