Mortgage Rate Update July 19, 2011

Mortgage rates are slightly worse this morning.

The Commerce Department reported earlier this morning that housing starts rose substantially last month.  However, the markets are ignoring this data instead focusing on Europe & debt-ceiling talks.

Investors remain concerned about the impact of a major government default in Europe.  It all started with Greece but now the fiscal stability of Italy, Spain, Portugal, and Ireland are being called into question.  In recent history this type of uncertainty has driven investors to the US, a phenomenon called a “flight-to-safety”, which has helped interest rates remain low.

However, that could all change if the US cannot agree on a way to raise the debt-ceiling.  No new significant developments have been reported in the past 24 hours but I remain confident that a deal will get done and the US will avoid default.  My guess is the deal will come at the 11th-hour and will simply kick the can down the road a couple years for the next congress to deal with.

Current Outlook:  neutral