Charlottesville SunTrust Mortgage - Market Update

Mortgage Rates:

With few economic reports released during the week, news of progress in talks to provide aid to trouble European countries and our own debates to increase the U.S. debt ceiling had the most influence on rates. As the perceived risk of default in Europe decreased, investor retreated from the safety of U.S. bonds which pushed rates slightly higher. The proposed deficit reduction in our own debt ceiling was favorable to mortgage rates helping to balance the reversal of investor’s interest in U.S. bonds

European Union officials released a significant plan for providing aid to EU countries with debt problems. Thursday’s announcement of a new aid package for Greece and an overhaul of the region’s rescue fund reduced investors concerns that the debt problem will spread. In particular, the European Financial Stability Facility (EFSF) will have the ability to make loans to European nations at lower rates than the nations could get on their own, easing the threat of default. Investor reaction was to reverse some of the flight to quality and return to riskier assets.

What about our own debt ceiling? With mortgage rates remaining low as well as Treasury yields, it is apparent that investors believe the debt ceiling will be raised. The major concern is how far lawmakers will go in addressing the budget deficit. Simply lifting the debt ceiling without addressing the deficit in a major way would likely disappoint investors and be bad for mortgage rates. A serious movement to bring the deficit under control now, not years down the road, would likely bring Treasury yields and mortgage interest rates even lower. The debates continue with the heat rising, but folks this one is important!

Sandra S. Madison

Senior Mortgage Loan Originator

NMLS # 43902

(434) 566-2420 direct line

www.suntrustmortgage.com/smadison