With mortgage rates rising — and unnerving investors —Federal Reserve officials have swung into damage-control mode, trying to reassure Wall Street that they won’t abruptly withdraw the stimulus that has kept long-term borrowing costs at record lows.
Freddie Mac’s latest survey of lenders, released Thursday, showed the average rate for a 30-year fixed home loan had leaped to 4.46 percent from 3.93 percent last week — the biggest one-week jump recorded by the survey since 1987.
The benchmark 30-year rate is up more than 1 percentage point from the record lows that began last fall, including one reading of 3.35 percent just last month. Analysts said the increase would smother a long boom in mortgage refinancing and probably would slow down fast-rising home prices.
The markets seemed to be listening. The yield on the 10-year Treasury note — a proxy for fixed mortgage rates — fell to 2.47 percent on Thursday, down for a second day from a close of 2.61 percent on Tuesday. Stocks moved higher for the third day in a row.
Fears of an end to Federal Reserve support had prompted a recent sell-off in stocks as well as the surge in long-term bond and mortgage rates. That combination clearly concerned top officials at the Fed, which has been buying $85 billion a month in Treasury and mortgage-backed securities to keep rates low — a major stimulus for the key automotive and housing markets.
William Dudley, the influential head of the New York Fed, said Thursday that expectations for an early end to the bond-buying spree are “out of sync” with the intent of policymakers at the central bank.
The remarks were echoed by Fed Gov. Jerome Powell and a third policymaker, Dennis Lockhart of the Atlanta Fed, who said in prepared remarks: “There is no ‘predetermined’ pace of reductions in the asset purchases, nor is the stopping point fixed.”
Read More: Latimes.com