Mortgage rates dip as taper fears subside

• Mortgage rates fell to 4.37%25 from 4.51%25 last week
• Rates are still close to their two-year high
• Fed Chairman Ben Bernanke says the Fed will continue to stimulate the economy%2C keeping rates low

An ebb in concern over the Fed relaxing its bond-buying program has led to a drop in mortgage rates.

Mortgage buyer Freddie Mac reports the average on a 30-year mortgage has fallen from its two-year high of 4.51% to 4.37% this week. The average on the 15-year mortgage fell to 3.41% from 3.53%.

Rates have spiked in the last two months in response to the Fed announcing it will eventually begin "tapering" its aggressive bond purchases. At the start of May, rates on the 30-year mortgage sat at 3.35%, just above the record low of 3.31%.

The jump in rates has put a drag on the housing recovery. On Wednesday, the Commerce Department reported a 9.9% decrease in housing starts for the month of June, their lowest level in 10 months. The Mortgage Bankers Associated also announced Wednesday that weekly applications for mortgages fell 2.6%, continuing their slide of the past few weeks.

While the data shows the housing recovery has lost some steam, the big picture still looks promising. Starts are still up 10.4% from a year ago and applications for permits to build single-family houses rose to the highest level in five years. The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday jumped to 57 this month, putting homebuilder confidence at a 7-year high.

In a testimony to congress on Wednesday, Bernanke assured officials that the Fed would delay tapering if the rise in rates puts a greater strain on the housing recovery.

"We will be waiting to see if the movement in mortgage rates has any material effect on housing," Bernanke said. "If we think the mortgage rate increases are thwarting the progress, we will have to take additional action."

Following the Chairman's comments, the yield on the 10-year treasury note fell to 2.49% from 2.53% on Wednesday as investors began buying up U.S. bonds. Mortgage rates typically track the yield on the 10-year note, which rose to 2.52% on Thursday.