Mortgage rates in the US fell this week, after a month-long increase that coincided with the Federal Reserve’s ending of home loan debt purchases.
Rates of 30-year fixed mortgages fell 5.07 percent for the week that ended April 15, from 5.21 percent, said mortgage finance company Freddie Mac. The rates hit an eight-month high last week after the central bank ended its programme on March 31 to purchase mortgage-backed securities worth $1.25 trillion.
Donald Rissmiller, chief economist at Strategas Research Partners in New York, said, “There was a little bit of a hiccup.” He added that “when the dust is settled, the Fed has been able to back away from the market without too many problems.”
The government’s programme helped reduce rates to an all-time low of 4.71 percent in December. The government bond purchases from Fannie Mae, Freddie Mac and Ginnie Mae, which are agencies that purchase from lenders and package them into securities, brought down yields and allowed lenders to reduce mortgage rates while selling the bonds at a profit.
Meanwhile, the week’s average 15-year mortgage rate was 4.4 percent.
Mr. Rissmiller said that investors purchased enough mortgage-backed securities to ease yields, as the Federal government withdrew from the market.
The Mortgage Bankers Association’s index of mortgage applications dropped 9.6 percent in the week that ended April 9. Applications to purchase homes slumped 11 percent, and the portion of refinancings also dropped nine percent.