Well it finally got done—the deal to bailout Greece and avoid a disorderly default—got done. Well, I guess I should say, “avoid a disorderly default for now”. Current mortgage rates are moving higher today, yet not as quickly or as high as I expected on this news. The reason for the tentative rise is probably that traders do not believe that the deal means much in the long term.
Almost as soon as the deal was announced, market participants were issuing statements suggesting that the deal had very little meaning beyond the next few weeks or months. Still ahead for this deal is ratification by each of the parliaments of the euro zone countries. Finland and Denmark are believed to be the two countries most likely to reject the deal. Agreement must be unanimous or the deal doesn’t take effect. Next, the deal will have to survive the Greek national elections set for early April. Most political observers in Greece expect the new unity government to simply declare the entire agreement or selected pieces null and void upon taking power.
In the US today there is no economic data being released that is likely to move mortgage rates. There will be a US Treasury auction of 2 year notes, but that is unlikely to impact the markets significantly. Tomorrow has only one minor report—existing home sales—which could be interesting if it shows an early pick-up in sales due to the warm weather thus far this winter in much of the country.
For the American consumer needing a mortgage to purchase or refinance a home, the news that a deal has gotten done to avoid a default in Greece increases upward pressure for mortgage rates. When combined with strength in US economic data, it will likely result in meaningfully higher costs over the weeks and months ahead. However, with the US Federal Reserve committed to fostering a low interest rate environment for years, rising gasoline prices and tension with Iran, the impact should not be dramatic.
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