The government shutdown and mortgage rates

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On Oct. 17, lawmakers finally passed an amendment to increase the debt ceiling and reopen the government, which had been closed since Oct. 1. Reports were telling us that if the U.S. had defaulted, we would have seen mortgage rates spike.

Since the lawmakers came together and raised the debt ceiling, one would think that everything is fine and that we should be carrying on just like we did before, but that’s not the case. The government shutdown came at a time when the Fed was still very worried about the economy’s weak state. This costly game of chicken between the two parties made matters worse, which showed up in some very low consumer confidence numbers.

What does this mean for mortgage rates? It means that we could see them come back down. Whenever you see economic weakness as we are experiencing currently, you will see rates decrease. The government band-aid that was passed is only through the beginning of February 2014, when the fighting will start again.

All this uncertainty will make the markets nervous, which puts downward pressure on mortgage rates. Another factor that may keep mortgage rates down is that job creation is again stalling. At the time of this article, we still do not know what the unemployment rate was for the month of September because of the government shutdown.

The next few months will be critical in terms of which direction the economy and mortgages rates will go and, could set the trend for what we will see in 2014.

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About Ron Ricchio

Renato (Ron) Ricchio is president of Chicagoland Home Mortgage. He grew up in Westchester and attended St. Joseph High School and DePaul University, taking a job as a loan officer in the mortgage industry soon after graduating with a bachelor's in finance in 1991. He started his own company in 2001, which he operates today. He has been ranked in the top 150 loan originators in 2010 and 2011 by Origination News. Ron is happily married with three beautiful children. A board member of San Francesco Di Paola Society and the founder of Ricchio Family Toy Drive for Lurie's Children's Hospital, he enjoys cooking and spending time with family and friends.

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