Mortgage rates for 30-year U.S. loans tumbled to a two-month low after the Federal Reserve said it wouldn’t reduce its pace of monthly bond buying.
The average rate for a 30-year fixed mortgage dropped to 4.32 percent from 4.5 percent, Freddie Mac said in a statement today. The average 15-year rate decreased to 3.37 percent from 3.54 percent, according to the McLean, Virginia-based company.
Fed Chairman Ben S. Bernanke, who is nearing the end of his second term, said last week that more evidence is needed before the central bank begins to taper its stimulus program aimed at lowering borrowing costs. The move is giving homebuyers a limited reprieve from a surge in mortgage rates that had started to cool housing demand.
“This is kind of a temporary pause,” said Ellen Haberle, an economist at Redfin Corp., an online real estate search service and brokerage based in Seattle. “With all of the uncertainties as to when the Fed will taper and who the next Fed chairman will be, mortgage rates will show some volatility the next few months.”
Borrowers may be rushing to take advantage of the decline. Mortgage applications for home purchases jumped the most in six months in the week ended Sept. 20, the Mortgage Bankers Association said yesterday.
The average rate for a 30-year loan surged to a two-year high of 4.58 percent last month from a near-record low of 3.35 percent in early May. Homebuilders KB Home and Lennar Corp. reported a slowdown in orders this week as buyers held off on deals. Douglas Yearley, chief executive officer of Toll Brothers Inc., said at a Bloomberg conference two days ago that contracts in the first seven months of the quarter are flat.
Higher rates have “caught some buyers by surprise and a few backed out of their purchases,” Jeffrey Mezger, chief executive officer of Los Angeles-based KB Home, said on an earnings conference call. “We are also seeing some potential buyers who are taking a little longer to make the homebuying decision, as they digest the combination of increased mortgage rates and higher prices in any given market.”
Purchases of new U.S. homes rose 7.9 percent in August following a plunge in July, capping the weakest two months this year, data from the Commerce Department showed yesterday. Pending home sales, based on contract signings of existing homes, slipped 1.6 percent last month, the National Association of Realtors said today.