Mortgage Market Update
Mortgage Market Update- December 2, 2012
The debt ceiling debacle of 2011 has resulted in the market watching the negotiations, or lack thereof, going on in Washington. This has resulted in the stock market making some pretty wild swings this week meaning the bond market has also been all over the place.
How this started
For those who don’t remember or were not paying attention, as part of agreeing to raise the debt ceiling, it was agreed a super committee would be put into place to come up with a series of spending cuts and new revenues. Unfortunately, this committee couldn’t reach an agreement which should not be a great surprise to anyone. As a result, automatic spending cuts and tax rate increases are scheduled to go into effect on January 1, 2013. This uncertainty is reflected in the roller-coaster ride that the stock market is currently on.
Consumers, businesses and investors
Wall Street hates uncertainty and this was certainly reflected during this week. When “positive” news came out of Washington, the market rallied. When the news was not so good, the market tanked. Ironically enough, most polls show that consumers are more bullish than ever and even businesses seem to feel that an agreement will be reached to avoid the upcoming “fiscal cliff”. Consumers and business owners seem to be slightly disconnected from Wall Street during this past week since the market made some pretty dramatic swings up and down during the week.
Other news impacting bonds
Consumer confidence continues to be improving and in fact this week showed a high mark not seen since 2008. In addition, home sales continue to be on the upswing with the housing market showing its highest numbers since March of 2007. Combine that with a .7% increase in Gross Domestic Product (GDP) and it was a recipe for a stronger economy but a slightly higher bond market. This is largely due to the fact that the stronger the environment, the higher interest rates on bonds.
The week finished with continued skepticism of Washington reaching a deal meaning that this weeks mortgage rates finished more favorably to those who are seeking a mortgage. The continuing fiscal cliff discussions should be monitored carefully since once Washington does reach a deal, chances of mortgage rates increasing become better. Keep in mind that failing to reach a deal before the deadline of December 31 means the overall economic outlook will be more grim which is typically good for bonds. If you’re considering buying a home or you have a mortgage application in process, this may be a good time to consider locking in an interest rate. At Core Mortgage Financial we understand that the uncertainty in the market can wreak havoc on your financial planning and we’re here to help you understand the myriad financial data coming out weekly.
Disclaimer: Mortgage Market update is for November 26-30, 2012. This article is for informational purposes only. The mortgage market update should not be used for rate lock guidance.