Mortgage Market Update
The silly season of politics has ended and President Barack Obama is now slated to be the 45th President of the United States. As anticipated, this news caused a palpable decrease in equities and an increase in bond purchasing. The day after the Presidential election, bank stocks and energy companies took substantial hits while hospital stocks tended to trend slightly upward. Interestingly enough, the market rebounded slightly during the day but still finished substantially lower. Much of the down-tick we saw could be due to the threatened “fiscal cliff” which faces the United States while some of the down-tick may also be contributed to European financial woes.
Hidden stories of economic stability
While there will be people on both sides of the political fence who have their own opinions about the economy, consumers in general feel fairly positive with consumer sentiment rising to the highest levels in nearly five years. In addition, the new unemployment claims through the week ending November 9th showed a sharp decline over last week of 2.2 percent while the annualized figures show a decline of nearly 11 percent.
International concerns impact
Fortunately for US investors, negative international news may have had a slight impact on new bond buying which was positive for the mortgage backed securities market this week. The European Central Bank (ECB) elected to keep rates where they were while Greece instituted yet more austerity measures which triggered more rioting in the streets. Germany even played a role in economic news this week releasing data which shows that they too have downgraded their economic outlook. The European Union released new forecasts which show far less growth than anticipated for at least two more years. This negative news was bad for the stock market but turned out to be good for the bond market.
Fiscal cliff, debt ceiling and our bonds
Few of us have forgotten the slap in the face from the bond rating agencies that resulted after the last nightmare of the rise in the debt ceiling. When Moody’s originally downgraded US Bonds they stated “The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.” Unfortunately, as you’re probably aware, we still have a majority of Democrats in the Senate and a majority of Republicans in Congress. This could open the door for yet another downgrade if the credit rating of the US.
For the time being, mortgage rates remain low, US debt has fallen slightly and the market for mortgage based securities being sold by the US Treasury remain strong. For consumers, this is great news if you are considering buying a home. Since we still have no real way to determine the outcome of the negotiations between the Senate, Congress and the President to deal with the upcoming fiscal cliff, it is a good idea to consider locking in your current rate or to get pre-approved for a loan today. Contact Core Mortgage Financial today and take advantage of the lower than expected mortgage rates.
Disclaimer: Mortgage Market Update is for informational purposes only. Weekly mortgage commentation is designed to assist our readers with mortgage market updates.