Mortgage Rates Fall in Wake of US Downgrade

Mortgage interest rates appear to be falling in the wake of the S&P downgrade, leading some to wonder just what to make of all this. Honestly it is a little perplexing if you think about it... S&P downgrades, US government debt, Fannie Mae and Freddie Mac along with a slue of other entities, and what happens... the private markets sell off and the downgraded debt rallies into higher territory.

The following day (today) we watch the stock market ping pong between gains and losses while the mortgage backed securities market rallies from lows (8 ticks down) to up 33 ticks on the day... that's 1:01, or a full point for those that don't speak technical.

A strange world we live in and its clear investors are as puzzled as the rest of us. This is the markets reacting to just that, no one knows where to put their money, yet no one wants to earn nothing on their money so they're scrambling for cover and whatever exits show some return with little to no risk. A difficult position to find, a point affirmed by the Fed today by their expressing the will to keep rates low for an extended period yet again...

The low rate environment doesn't seem to be working the magic they had hoped it would, and our economy is teetering once again on a perilous slide down eroding wealth along the way. Of course those in power will stop at nothing to make sure this doesn't happen. Unfortunately that means infusing more capital, which means inflation... something no one wants to talk about but everyone knows is a real and looming problem.

There is no way out of this corner without some bruises... and it's going to be some time before this market works itself out. Right now there is a simple relief for homeowners which is taking advantage of the low rate environment. With mortgage backed securities trading at near record highs, interest rates for homeowners are near record lows. That means pleasant salvation for anyone that missed the chance to refinance last year when we hit historic lows. The carnival is back in town and the rates are as good now as they have ever been, so if you can find your way through the all the red tape and qualify now's the time to have at it.

Of course I'm here to help anyone that needs it, and my interpretation of the market will continue to be made available through this blog.