After watching the news regarding the Debt Crisis and the heavily divisive politics that seem to be choking this country, I have to ponder the effects a default will have on our industry. The effects of rising interest rates on new loans has already been discussed but I think that another area that has been overlooked (to some extent) is the effect on existing mortgages. Like it or not there are still a large number of ARM's out there. If the Country defaults and interest rates rise we are going to see an increase in foreclosures. In a struggling market this increase could dramatically affect all aspects of our market in a negative way. With so many other areas negatively impacted this may seem like watching one piece of ice in the proverbial "hail storm" but I think we all should be aware of some of the less talked about aspects of rising mortgage rates. I do not pretend to know all the negative affects this crisis could have on our country (I don't think anyone can) but I do know that there are no positives to a default. If there is anyone who disagrees with this (or would like to offer other areas for consideration) I invite you to comment so we can discuss it further.
I think this might affect interest rates on mortgages, credit cards, personal and commercial loans and all consumer related purchases. I don’t think we have really started to grasp hoe serious this could actually be.
Its a political posture game and those WE elected don't seem to care about anything other than posture and re-election. That to me is the saddest part. We will not default on our debt. A deal is almost a guarantee in some fashion and both sides will spin it as they are the hero. "When we cant see anything beyond ourselves we are truly lost"
Sidney,
We've seen the market work very well with interest rates at 12% albeit it's been sometime since we've seen those rates. Today's rates continue to bounce along at 40 year lows to everyone's (or at least my) amazement.
Have a great week,
Steve
I agree we have seen the market work with higher rates in the past but in our current state I dont know if we will do as well. I also agree that we do not know the extent to which a default would impact our economy. The truly frightning thing to me is that although I am 70% sure we will have some form of a deal before the deadline, I am not sure it will be enough to keep our AAA status. Just having a system that allows a 30% chance of default to linger this long really speaks to the broken nature of our politics.
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