Will Mortgage Rates Keep Falling in 2013

As with many news stories it seems the press is always  a day late and a dollar short. Basically we get the news too late. As is the case with this article published today Wednesday July 24th 2013
The mortgage rate environment has been on an upward trend ever since Ben Bernanke, Chairman of the Federal Reserve spoke May 22nd 2013. In essence what he said is that the economy is improving and the monetary policy known as Quantitative easing could be coming to end sooner rather than later. He called this tapering.
This sent the Bond Market into a panic.. Frenzied selling drove prices down and yields way up. Now after 2 months of trying to unravel his statements we finally started seeing some improvement in mortgage rates this week: When Wham! We get another day of panic and rates spiking. This volatile environment for mortgage rates has become unnerving and reason for concern. The housing recovery is an underpinning of our economic recovery. And without a housing recovery or a jobs recovery we are dead in the water. Now rates spiked up again today and the mortgage market is getting hammered. How high will rates go? That is anyone’s guess. Because just like the stock market rates change daily and are influenced by a variety of economic factors.


Interest rates for U.S. home mortgages dropped last week for the first time in two-and-a-half months in the wake of soothing comments from Federal Reserve Chairman Ben Bernanke, but demand for home loans still fell.


Fixed 30-year mortgage rates averaged 4.58 percent in the week ended July 19, down 10 basis points from the week before, the Mortgage Bankers Association said on Wednesday.

It was the biggest weekly drop since August 2012, though rates are still well above the 3.59 percent seen at the beginning of May before they started moving higher.

Comments from Bernanke last week acted as a balm for rattled markets as he said that the timeline for winding down the central bank’s bond-buying program was not set in stone.

The Fed has been buying $85 billion a month in bonds and mortgage-backed assets to keep borrowing costs low and stimulate economic growth.

The low mortgage rates have helped to lure buyers as the housing market gets back on its feet, but concerns the program could end sooner than had been expected sent rates sharply higher over the summer.

In testimony last week, Bernanke said the Fed still expects to start scaling back its bond purchases later this year, but he left open the option of changing that plan if the economic outlook shifted.

The recent higher cost of mortgages has raised concerns that the increase could dampen demand in the sector and slow the housing recovery, though most economists do not expect it to be derailed. Even with the increase, rates remain historically low.

Still, last week’s decline in rates did not bolster demand for mortgages. The MBA’s seasonally adjusted index of loan requests for home purchases, a leading indicator of home sales, fell 2.1 percent.

The gauge of refinancing applications slipped 0.7 percent. The refinance share of total mortgage activity was unchanged at 63 percent of applications.

The index of mortgage application activity, which includes both refinancing and home purchase demand, fell 1.2 percent.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.