Mortgage Rate Update November 8, 2011

Mortgage note rates are unchanged this morning but the accompanying closing costs are slightly lower so overall the rate environment has improved modestly.

All eyes are focused on Italy today.  A similar political show down that just played out in Greece is playing out in Italy today.  Embattled Prime Minister Silvio Berlusconi is trying to hang onto his position while the parliament votes on whether to support his budget or not.  What’s at stake?

Investors are fleeing Italian Government debt for fear of default which is pushing interest rates higher making it more costly for them to borrow and putting even more pressure on their fiscal condition.  The yield on the Italian 10-year note is currently about 6.66%.  To put this perspective Portugal, Ireland, and Greece were forced to seek international support when their borrowing costs on their respective 10-year notes hit 7.00%.

As I’ve stated before the EU bailout fund is not big enough at this point to be able to handle an Italian default so fear of contagion is spreading throughout the financial system.  This should cause investors to seek “safety” in the US and help mortgage rates move lower but thus far they are staying put.

Current Outlook: floating bias