Current mortgage rates are likely to move lower today as fears and anger spread around the world about the inability of political leaders in Europe and the United States to work out reasonable policies to cut spending and stabilize their respective economies. In the US it is the lack of success by the so-called Super-Committee in Congress. In Europe it is really about a lack of political will to do what is necessary to keep the European Monetary Union together.
In the US the stock market is headed for a big loss today as analysts speculate about the impact of the failure of the Congressional Super-Committee to come up with their mandated $1.2 trillion in spending cuts. Most analysts believe they will try to change the rules to essentially give themselves more time, but the US credit rating may be at risk again without definite action and perhaps with cuts that go well beyond their mandate.
In Europe there are many different things that are causing fear among economic analysts. Despite the absolute majority won by the pro-austerity party in Spain, Spanish bond yields have continued to climb. Also in Italy, despite the formation of a new government, bond yields continue to increase which makes borrowing even more expensive. In France bond yields have increased and a major bond ratings firm has placed the nation on a downgrade watch. And finally in Germany, the government has repeated its opposition to more aggressive action by the European Central Bank to backstop its Eurozone partners experiencing such trouble increasing the likelihood that the Euro’s run as a common currency may be close to an end.
Some analysts are predicting doom and gloom and potential depression resulting from these events. The impact on mortgage rates should remain positive unless better news emerges. Of course, great rates with a bad economy, is no great situation. Despite our recent economic improvement we may pay a heavy price for the inability of political leaders to actually lead.
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