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Economist Predictions About Fed Barely Affect Housing Rates

Economist and interest rates
All three mortgage loan interest rates moderately increased this week according to rate reports provided by loans.org. Although the weekly rates have stayed relatively stable over the past month, this week economists predicted that the Fed’s bond purchase reduction will begin in a month’s time.

For the week ending August 15, 2013, the 30-year fixed-rate mortgage averaged 4.37 percent, a decent increase from 4.25 reported last week.

The 15-year FRM averaged 3.34 percent. This rate grew from 3.27 percent set last week.

The final monitored mortgage loan interest rate increased 10 basis points. The 5/1 adjustable-rate mortgage averaged 3.24 percent this week, up from 3.14 percent last week.

Despite the few changes, mortgage loan interest rates do change state-by-state. For example, borrowers in Maine face average interest rates at 4.44 percent while those in Florida have lower than national averages of 4.35 percent.

Frank Nothaft, vice president and chief economist for Freddie Mac, said the fixed rates have been “bouncing around” for several weeks due to market speculation about the Fed.

The announcement that the Fed would reduce and then eliminate bond purchases caused consumer concern and large rate spikes in the housing economy this summer. For weeks since the announcement, a formal timeline has not been released. Despite the lack of information, economists are confident when a formal decision will be made.

According to a recent survey by Bloomberg, 65 percent of economists expect the Fed to reduce their bond purchases during the September 17-18 committee meetings. The survey discussed the Fed’s potential plans with 48 separate economists.

The survey predicts that the monthly bond purchases will likely reduce by $10 billion to a $75 billion per month pace. The economists further predict that bond purchases will be eliminated completely by the middle of 2014.

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