Dennis' Mortgage Blog

The "Arab Spring" has garnered much of our foreign relations attention in 2011.  Uprisings in Egypt, Libya, Syria, Iran, Yemen, and the killing of Osama bin-Laden have pushed out almost all other news from other nations and regions.  Unless you read financial sections.

Like the Spring of 2010, this Spring has seen serious financial turmoil in Europe.  Last year the Greeks were rioting because the government was broke and said the people had to work a year or two longer before getting their government pensions.  Ireland and Spain were teetering on the brink.  France and Germany were making noise that they were not going to bailout the failing countries unless they made significant changes in budgets and fiscal policy.  It appeared the European Economic Union would collapse that perhaps the Euro, that nifty monetary unit that was to unify Europe, would be torn to shred as countries rushed back to francs, marks, lire and drachma.

Today Standard and Poors issued a rating downgrade for Greece that was so obvious most people thought it was just a reiteration of a prior rating.  Greece's prior rating of double B- (minus) was downgraded to single B- (minus), less than the rating many Third World countries enjoy.  With the downgrade the Euro has fallen against the dollar and other currencies and the debt of other European nations have come under suspicion and their rates have risen.

Greece complained about the downgrade saying there was no new data available to warrant the downgrade. Note that Greece's debt is 143% of its GDP, for the math disinclined, if Greece's total economic output is $1 million they owe $1.43 million, or 43% more than they make as a nation.  Factor in that GDP does not go straight to tax revenue and you can easily see that the Greeks have a bit of a situation.

Greece's financial situation, while the worst in Europe, is not unique on the Continent.  Spain, Italy and Ireland's creditors are concerned because they too are unbalanced with heavy debt and low economic growth.  Greece is rumored to be leaving the Euro which is causing great concern in Germany, France and Great Britain whose banks are heavily invested in Greece's recovery.  Great Britain is currently on the hook for more in bailouts to European Union nations than they have budgeted for domestic programs.  Sell that to your voters.

So while the protests in the Middle East are violent and aimed at revolutions overthrowing regimes, in Europe a financial revolution is brewing that can rip apart the economic union and currency.

You're buying or refinancing a home in America, what do you care?  Well you care because greater risk in Europe means more investors looking for bond investments will invest in American bonds, and mortgages.  That is good news for U.S. interest rates.  Predictably mortgage rates responded today by going a little lower to their lowest rate since mid-December 2010.

Mortgage rates continue to remain low for the time being.  Call or email Dennis today to determine your purchasing power for a new home loan or monthly savings from a refinance.  Direct dial 562-472-1118