Mortgage Rate Update December 12, 2011

Mortgage rates are unchanged this morning.

Thus far the verdict on last week’s Euro-zone summit is that it was (another) bust.  Once again expectations were high that EU leaders would come together and take bold action to curb the probability of financial contagion.  However, the summit failed to deliver and rates remain low here in the US.

Adding to the uncertainty is a report released by European banking regulators that shows a complicated web of credit default swaps (CDS’s) held by European financial institutions.  CDS contracts pay-off when bonds default so if/ when this takes place it could lead to a domino effect bringing down banks in swift fashion.

Here in the US, stocks are trading lower as investors worry about the ripple effect of a financial collapse in Europe.  Bad news for the economy is often good news for mortgage rates.

The economic calendar is heavy this week but in the past few months economic data points have been overshadowed by developments in Europe.

Current Outlook: neutral