For Sale

Demand for home loans been lower than expected as the housing market has cooled. (Daniel Acker / Bloomberg)

E. Scott Reckard
Friday, May 9, 2014

As 2014 arrived, experts were confident that the 30-year mortgage rate would rise to at least 5% this year as the Federal Reserve cut back a bond-buying program, which had depressed the rates to unheard-of lows in 2013.

So much for the experts. The Fed has reduced purchases to $20 billion a month in mortgage bonds, down from $40 billion when the program began in September 2012. Yet lenders this week were offering 30-year fixed home loans at an average of 4.2%, the lowest rate in six months, according to home finance giant Freddie Mac.

According to one leading Southland mortgage broker, Jeff Lazerson, certain borrowers with excellent credit are once again able to get 30-year loans with fixed rates a smidge under 4%.

Wiping some egg off their faces, economists said unforeseen factors have led worried investors to embrace the safety of high-quality bonds this year. And when demand for bonds rises, their effective interest rates fall. The yield on the 10-year Treasury note, at 3% when the year began, has slipped to about 2.6%, and home lending rates have followed, as they generally do.

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