Mortgage Rate Update May 7, 2012

Mortgage rates are back at all-time low levels making it a great time to lock in a rate for a home purchase or refinance.

Elections in France & Greece have shown that citizens in those countries are unhappy about austerity cuts forced on them by European finance officials.  In France, Socialist Party candidate Francois Hollande beat out incumbent Nicolas Sarkozy on a platform which promises to soften spending cuts.

INCOMING FRENCH PRESIDENT FRANCOIS HOLLANDE DEFEATED THE INCUMBENT OVER THE WEEKEND AND DEEPENED WORRIES ABOUT THE EU CRISIS.

Similar election results took place in Greece where incumbent political parties were voted out of power in favor of far-left and far-right candidates.  This follows events in Holland a couple weeks ago when the Prime Minister of that country unexpectedly resigned because he was unable to build a coalition to agree on a budget.

Why are the politics of EU countries significant for US interest rates?

Thus far, solutions to the EU debt crisis have been dependent on EU member countries to accept steep austerity cuts.  The political shake-up has investors concerned that these targets will not be met and the crisis will worsen.

When anxiety over the EU debt crisis deepens it causes investors to seek “safety” in US-denominated debt securities including mortgage-backed bonds (MBS’s).  The additional demand for MBS’s is what causes rates to move lower.

Current Outlook: floating