What is Happening in the Mortgage Market

Standard & Poor's Downgrades U.S. Credit Rating, Fannie Mae and Freddie Mac
What Does This Mean To You?

On Friday, August 5, credit rating agency Standard & Poor's (S&P) downgraded the United States' credit rating one notch from AAA to AA+. Though this was an historic decision, as the United States had held it's AAA rating from S&P since 1941, it wasn't a surprising one. S&P had previously said it would lower the rating if Congress did not reduce the federal deficit by $4 Trillion over 10 years (the Debt Ceiling/Deficit Reduction Bill passed on August 2 only called for a deficit reduction of $2.4 Trillion over the next 10 years). In addition, S&P also downgraded certain entities linked to US debt, including Fannie Mae and Freddie Mac.

So what does this mean...both for our economy and home loan rates?
Maintaining our AAA credit rating reinforces the United States' role as the reserve currency of the world or a place where investors will place their money as the ultra safe haven. This is a key factor for our continued economic recovery.

But it's important to keep in mind that S&P is currently the only credit rating agency that has downgraded the United States. Both credit rating agencies Moody's and Fitch have maintained the United States' AAA rating. Also, with the ongoing credit crisis in Greece and other parts of Europe, most of the world still sees the United States as a safe place to invest their money. This bodes well for our economy and also our Bond Market, including Mortgage Bonds, to which home loan rates are tied.

The bottom line is that home loan rates remain near their historic best levels, but about the only thing that is certain in the markets right now is the volatility. If you've been thinking about buying or refinancing a home, give me a call or send me an email to see if you could benefit from this situation.

Sincerely,


Richard Woodward
Envoy Mortgage
Rwoodward@Envoymtg.com