Current mortgage rates have improved slightly over the last 24 hours as analyst after analyst comments on the debt crisis that is facing Europe despite more strong economic data in the US. I expect a volatile day for mortgage rates as the news stories battle for prominence.
Let’s sample some headlines from this morning’s news: “How Painful Would a Eurozone Exit Be?”, “Obama Says Lack of Political Will to Solve Europe”, “ Greek Govt Set to Win Confidence Vote, Cracks Emerge”, “Markets Will Force the ECB to Buy Bonds: Analysts”, and finally the encouraging, “European Debt Crisis: You Haven’t Seen Anything Yet”. It is no wonder that investors are cautious in bidding up stocks and reacting too positively to strong economic data in the US when there is a constant chorus of doomsayers. Have things in Europe actually gotten worse since last week? Clearly, the answer is no.
Last week both Greece and Italy were facing uncertainty with the collapse of both governments and no clear path forward. Today we have new governments and new leaders in both nations who have succeeded in early votes to establish a way forward. On Monday bond yields in these countries and throughout Europe did rise as the first tentative steps by the new leaders were taken and the enormity of the challenges that lay ahead were considered, but these bond yields have improved with the progress seen.
What is clearly different from last week is that the US economy is clearly getting better. Manufacturing and inflation data has been good and retail sales exceeded expectations. Just released industrial production figures for the past month show clear strength in the productive, goods producing output of the US. These are facts versus the speculation about Europe.
What this means is that rates should be under upward pressure rather than the downward pressure that we are witnessing. The risk for borrowers is that a sharp reversal in rates is possible at a moment’s notice should good news come from Europe. Locking interest rates given this rate change risk is my advice today for those needing or wanting a mortgage for refinance or purchase.
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