Interest Rates Make Little Change After Fed Announcement

Investors have not reacted as dramatically as expected to the Federal Reserve’s recent decision to start tapering its stimulus program. The result is that long-term mortgage interest rates have made little movement over the past two weeks.

During the week ended today, Dec. 26, the average rate on a 30-year fixed rate mortgage (FRM) inched up to 4.48 percent, excluding fees from 4.47 percent, according to Freddie Mac. The week before the Fed’s Dec. 18 meeting and announcement  the 30-year FRM rate was only slightly lower at 4.42 percent.

The 15-year FRM was similarly slow to move. The week before the Fed statement the average rate was3.43 percent,the week after it jumped to 3.51 percent and this week it flickered up to 3.52 percent.

The Federal Reserve has been buying up $40 billion a month in bonds in order to keep rates low and give the markets a change to recover. Yet with its last meeting, the Fed decided that there are enough positive signs in the economy to start cutting back on that financial crutch. When the Fed even hinted at tapering its program back in the spring, rates shot up dramatically. Yet when they actually decide to do it, interest rates see almost no movement. Perhaps since the tapering won’t take effect until the first of the year, investors are waiting to see how things play out.

Frank Nothaft, Freddie Mac vice president and chief economist explained the forces behind the most recent week’s rate hesitancy.

“Mortgage rates were little changed this week following mixed economic reports, “ he said in a statement.  “Real GDP was revised upwards to 4.1 percent growth in the third quarter of this year. However,existing-home sales dropped 4.3 percent to a seasonally adjusted annual rate of 4,900,000 in November. Also, new home sales fell 2.1 percent to a seasonally adjusted annual rate of 464,000.”

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