There are many factors which affect mortgage interest rate movement. As the Debt-Ceiling charade continues, Los Angeles homeowners saw a .250% increase from week over week. The popular 30 Year Fixed Rate mortgage in the Los Angeles area was averaging 4.750% as of Friday, July 28. That represented a .250% increase for the same product as of July 21st.
Perhaps not a deal breaker for some, but if you are struggling to qualify for a mortgage and your income qualifying cannot be stretched any further, $57 per month, or $700 per year could represent whether you participate in the “American Dream” or not. That is the bottom-line reality those seeking to purchase or refinance a property are experiencing. While there may be other factors, surely the continued Debt-Ceiling debacle have resulted in the financial markets worsening. If it continues to go unresolved, as some political representatives have threatned, expect higher interest rates in the days to come.
What does the Debt-Ceiling
Have To Do With Mortgage Rates?
Regardless of your political affiliation or whether you are a political junkie or not, separating out the facts so you can understand the Debt-Ceiling affects on your mortgage is more important. After all, whether you are a Republican, a Democrat, an Independent, or even a person who doesn’t vote, if someone took $57 from your pocket every month, you would take notice!
Most people thought the Debt-Ceiling was some type of chocolate layered cake. That was prior to several months ago before it became everyday public discussion. In technical terms, the Debt–Ceiling is merely the amount the United States Congress authorizes the department of Treasury to pay debts, which have already approved or appropriated.
While it deals in finances or money, it has nothing at all to do with current budget items. As a matter of fact, the issue is administrative and routine for administrations going back past 100 years. Even though there is always partisan disagreement, both sides realize debts which have been authorized, must get paid to maintain a positive credit rating. In the past, once leaders had their say, the issue was quickly resolved because who in their right mind would want to be blamed for the United States of America to default in paying its bills?. Typical debt-ceiling legislation is a simple one page bill.
What’s All The Fuss About
Opinions will vary but no doubt most agree the United States must reduce its deficit. Some point to the spending by the Obama administration as the sole culprit for the deficit issue. Interestingly those who subscribe to that argument, most likely fail to mention the spending was accelerated due to the previous administration not properly accounting for two wars, a prescription drug bill and tax cuts provided to those who did not request them.
Further, while partisanship has been redefined and innocent homeowners are caught in the cross-hairs of this debate, the fact is the 49% who did not support the candidacy of President Barack Obama have declared open season on any legislation or political movement he is attempting to initiate. Currently, those in the House of Representatives which have a Republican majority have used their reason for being elected as justification to do whatever is necessary to halt anything the President is attempting to accomplish.
Despite being warned by economist and even angered homeowners, the ideology of those in disagreement with the President is to hold hostage any item being presented. That item currently is the innocuous Debt-Ceiling. All week there have been arm twisting, press conference and other antics claiming to offer resolution. One thing is certain; homeowners saw a .250% increase in mortgage interest rates this past week and if the issue is not resolved by the August 2nd deadline, that amount is sure to climb.
The sad fact is those who oppose the President do not care about the negative consequences they have inadvertently created. They appear more concerned in political theater. They are hell-bent on using their ideology to create a stalemate or chance to show their muscle, as if their constituents were immune to the .250% increase. Their concern with the budget is legitimate. However, the Debt-Ceiling should not be used as a red-herring as the U.S. Economy is too important. Just like in past administrations, once the Debt-Ceiling issue is resolved, there should be serious discussion about the the budget or real reason for all of the fuss. Homeowners have enough to worry about than someone causing prices to increase, unnecessarily.
In the meantime, many homeowners are waiting to see how the markets open respond Monday morning. Hopefully they have already locked in their interest rate.
THE COMPROMISE REACHED SUNDAY EVENING 7.31.11
United States Department of Treasury
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