Tapering happened—so now what?

Julie C. Nichols General

HousingWire – Brena Swanson

Just before the door could close on 2013, the Federal Open Market Committee shocked the market with its first tapering announcement, going against most analyst predictions. The Federal Reserve announced in mid-December that it would begin scaling back its mortgage-backed securities purchases to $40 billion per month from $45 billion per month. The committee also will begin reducing its purchases of longer-term Treasury securities.

As HousingWire previously reported in November, Freddie Mac’s Chief Economist and Vice President Frank Nothaft predicted the 30-year, fixed-rate mortgage would end 2014 near 5%. Despite Nothaft predicting that tapering would not occur until the first half of 2014, Freddie Mac has not significantly changed its stance on the trajectory of rates in 2014. The tapering announcement occurred a bit earlier since the economy is strengthening and getting back on track faster than what we thought, said Len Kiefer, deputy chief economist for Freddie Mac. Rates are not likely to surge higher since the initial impact is baked in from when rates soared in May 2013, he explained.

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