Mortgage rates to rise, but not because of taper

The Federal Reserve’s announcement Wednesday that it would reduce its bond-buying by $10 billion a month was seen generally as a moderate start to the highly anticipated taper. As such, mortgage rates, which follow bond yields, did not rise dramatically, as some had predicted.

“I was relieved by how the market has reacted so far and that we didn’t see a sharp rise in interest rates as a result of the Fed telling us that they were going to start tapering,” said Craig Strent, CEO of Apex Home Loans in Rockville, Md. “That certainly could have happened,”

The average rate on the conforming 30-year fixed mortgage has been at 4.57 percent since last week, according to Mortgage News Daily. But concern about the Fed’s potential move may have been behind a sharp drop in weekly mortgage applications, down 5.5 percent week over week, to the lowest level in 12 years.

“Mortgage interest rates generally hate the idea of uncertainty, so this definitely brings some certainty in terms of the Fed showing their cards as far as the direction of rates,” Strent said.

(Read more: Homes get makeovers as more mortgages are back in black)

Article source: http://www.cnbc.com/id/101283487

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