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Little impact on rates expected due to downgrade U.S. debt rating

August 11, 2011

Little impact on rates expected due to downgrade U.S. debt rating

Standard & Poor’s downgraded the U.S. debt rating Friday, leaving many wondering how it would impact mortgages backed by the government, including Fannie Mae and Freddie Mac.

While some have reported the downgrade is likely to lead to an increase in interest rates, the downgrade actually had the opposite effect. The 10-year Treasury, which most mortgage rates are tied to, is seeing its rate decline due to global economic environment.

According to Greg McBride, an analyst at Bankrate, mortgage rates are likely to remain low as long as the U.S. is battling a sluggish economy, but the nation could see a slight uptick in rates if Treasury yields edge higher. Furthermore, McBride said it’s unlikely mortgage rates will be an impediment for well-qualified borrowers, because the “weak economy will keep a lid on mortgage rates.”
Courtesy of C.A.R.

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