S&P Downgrade and First Time Home Buyer Loans
The downgrade of U.S. debt to AA+ by S&P has caused an enormous amount of volatility in the financial markets dating back to about the third week of July. Clearly, we’ve seen stocks fluctuate wildly. A great example was the Fed’s release yesterday that floored the market and then sent it rocketing higher at close. At the end of the day, both stocks and mortgage bonds increased in price. Stocks going higher will typically mean interest rates are heading higher and mortgage bonds going higher will typically mean that interest rates are heading lower. That conflict will sort itself out and it’ll likely be a volatile run for the next few days, weeks and months ahead. This is going to make for an interesting next few months as we evaluate state programs for first time home buyers.
Mortgage rates for FHA and conventional loans are driven by the market and change day to day, almost minute by minute in markets like these. The impact of this on the mortgage comparisons is then immediately felt. There’s a difference in the state programs. Whether it is Kentucky home buyer programs or Texas home buyer programs, the very nature of these interest rates are different than those of FHA and conventional programs. Governments tend to issue these bonds in large blocks, then offer the programs at a certain rate, and then go get new money. So, from bond series to bond series, they will vary, but from day to day they typically wont.