It's Blowing Up

Don’t look now but the budget deficit is blowing up! According to CNBC the budget deficit pushed above $1,000,000,000.00 (more dramatic if you type out the number) for the first time in seven years and it will most likely continue to move higher than that in the next few years. Our national debt continues to set record highs.

Simply put; this is bad news for consumer mortgage rates. I’m sure some of you, or maybe most of you, are saying how does the budget deficit impact mortgage rates?!?!

The Reason Why It’s Bad For Mortgage Rates:

As the US government debt expands this means the more supply of Treasury’s the US goverment will issue. The more supply means higher yields and pulls money from the Mortgage Backed Securities market. Higher yields and less money for MBS means consumer mortgage rates move higher.

How Soon Could This Push Mortgage Rates Higher?

Great question with no simple answers. It will become an issue when the market decides it is an issue. That could be next week, six months from now or six years from now. Overtime though as the government issues more debt that will help keep mortgage rates higher than they might be if the government issued less debt.