Mortgage rates are holding firm despite Italian economic troubles this morning. With only one fresh, but not significant, economic report being released today, mortgage rates are likely to remain close to current levels. Homeowners seeking to refinance or consumers seeking a mortgage to purchase a home will find current mortgage rates attractive and should consider locking in rates at these levels.
Standard and Poors (S&P) who caused such turmoil in the markets earlier in the summer by cutting the US AAA rating on its debt, is back in the news today after a similar move on Italian government debt. S&P cited both growth and political concerns as they downgraded Italy’s debt. One analyst put it this way: “This is a confirmation that the world’s third-largest bond market, and the euro zone’s third-largest economy, is in danger of succumbing to a self-fulfilling loss of confidence.”
In US economic news this morning, housing starts fell slightly from last month’s levels but permits for new construction ticked higher. This increase in permits was largely due to an increase in multi-family properties. Our nation of majority homeowners is in a transitional phase to become a nation of of majority renters.
The biggest news of the week will come from the Federal Reserve’s Open Market Committee meeting that begins today. Members of the committee specifically requested adding a second day to the meeting this month so they can more adequately consider potential responses to the Fed’s dual mandate to keep interest rates low and foster higher employment levels. Most “Fed watchers” expect the FOMC to recommend that the Fed use proceeds from maturing securities in its portfolio to purchase longer term US government debt. This has been dubbed “twisting” because it simply represents a new twist on the existing policy of purchasing US government debt.
Unless the FOMC announces a new round of new debt purchases requiring new dollars to be printed by the US Treasury, no significant impact is likely from their decision tomorrow. I expect the markets to hold firm until tomorrow afternoon and then only see a reaction if there is a surprise.
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