Interest Rates in the New Year
The Fed recently announced in December their intention to start tapering the bond buying program by reducing mortgage bond purchases from $85 Billion to $75 Billion. Many in the market were prepared for the decision, but none could truly predict its influence. How has this impacted interest rates at the beginning of 2014?
The 10 year Treasury, used as the benchmark for most fixed rate loans, touched over 3.0% early in January, but has backed down to 2.85% since then (as of 1/22/14). Insurance companies, CMBS lenders, and banks are all actively chasing good quality loans. This competition has caused spreads to tighten, resulting in low interest rates for consumers. Moving forward, it is likely we will see slow movement upward in Treasuries throughout the year, but this trajectory will be tempered by tightening spreads.