Mortgage Rates Plummet in Latest Reading
The mortgage roller coaster took another turn this week, though this time in homebuyers' favor.
Data released yesterday from Freddie Mac showed that the average rate on a 30-year fixed rate mortgage has dropped to 4.32%. For the previous five consecutive weeks, the figure had been at or above 4.5%.
The impetus was clearly the Federal Reserve's decision against tapering. Last Wednesday, the central bank announced that it has "decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month."
The market's reaction to this morning's news has been mixed.
On one hand, all of the major indexes were up after the announcement, including the S&P 500 . Also up were shares of the SPDR S&P Homebuilders ETF , which tracks the nation's largest homebuilders. Heading the other direction, however, was the KBW Bank Index , which is made up of the 24 biggest banks in America.
One explanation for the disparity between homebuilders and banks could be the ongoing legal issues that continue to plague the nation's largest lenders.
It was announced yesterday morning, for example, that the CEO of JPMorgan Chase , the nation's largest lender by assets, met with Attorney General Eric Holder about an investigation into the bank's sale of mortgage-backed securities prior to the financial crisis. According to the Associated Press, "an $11 billion national settlement is under review to resolve claims against" the bank.
Earlier this week, moreover, as my colleague Dan Radovisky discussed here, a federal administrative-law judge ordered Bank of America to pay almost $2.2 million to more than 1,100 African-Americans because of discriminatory hiring practices that the bank had employed in the past. This adds to a growing list of legal actions and settlements against the bank in the wake of the financial crisis.
So, what should investors expect from mortgage rates going forward? As I've noted elsewhere, your guess is as good as mine.
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The article Mortgage Rates Plummet in Latest Reading originally appeared on Fool.com.John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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