NEW YORK, Dec 16 (Reuters) - U.S. 30-year mortgage rates dipped on Tuesday, according to Zillow Mortgage Marketplace, after the Federal Reserve aggressively cut interest rates and pledged to expand significant planned purchases of mortgage bonds if needed to press rates down further.
The average interest rate on a 30-year fixed mortgage dipped to 5.01 percent on Tuesday from 5.06 percent a day earlier, Zillow said. A week ago, the rate was 5.29 percent.
The Fed’s short-term rate cut to near zero percent sent U.S. Treasury yields, a key peg for mortgage rates, to fresh five-decade lows.
The Fed reiterated its plan to buy up to $500 billion of mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae, and said it would expand those purchases as conditions warrant.
Increased demand for MBS can reduce yields, enabling lenders who sell mortgages into the bond market to reduce costs to borrowers.
Bankrate Inc, however, said that mortgage rates late on Tuesday held at 5.50 percent, with lenders “waiting for the dust to settle” before budging.
Prices for mortgage bonds surged on Tuesday but that hadn’t been passed on to consumers via lower mortgage rates as of late in the day, Bankrate said. The 5.50 percent rate, however, was well below 5.80 percent in the week ended Dec. 10. (Reporting by Lynn Adler; additional reporting by Julie Haviv; Editing by Diane Craft)