Fed, European Central Bank Keep Mortgage Rates in Check
It looks like mortgage rates will stay reasonable for the time being, as Fed caution and European stimulus help to keep a lid on big moves.
Bankrate, in its weekly survey, found that average mortgage rates largely unchanged last week, versus the week before. The benchmark 30-year fixed mortgage rate dropped from 4.34% to 4.33%, while the 15 year fixed inched up to 3.44%, from 3.43%.
Most experts were looking for higher rates this year, as the Fed continued its “tapering” of bond purchases. Bankrate points out, however, that the slow economy of early 2014 helped put the brakes on mortgage rate rises, despite the taper.
And while the Fed is tapering, the European Central Bank has moved into stimulus mode. Bankrate said that ECB policy has kept interest rates down in Europe, which has helped to make U.S. Treasuries more attractive to overseas investors.
With mortgage rates tied closely to government bonds, the overall effect of these moves is to keep mortgages affordable for U.S. customers.
So, between the Fed’s cautious approach to raising rates, and the effects of the ECB’s stimulus, we have some powerful forces working to keep mortgage rates pretty much where they are.
This doesn’t mean that rates will never rise above 5%, (as experts were predicting they would during 2014), it just means that things are calm for now.
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