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Desert Ridge Real Estate - Mortgage Update

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Blog by Doug Ingersoll | March 4th, 2013

From Stuart Crawford at V.I.P. Mortgage:

The biggest influence on mortgage rates last week came from the Italian election, which reignited investor concerns about Europe and prompted a flight to safer assets.  Fed Chief Bernanke continued to show strong support for the Fed's bond buying program, which was also positive for mortgage rates.  As a result, mortgage rates ended the week lower.

Last Monday's election in Italy showed very close results between the top three candidates, and it will be very difficult to establish a coalition government when no party has a majority.  A long period of negotiations will take place, and another election may be required.  What is clear is that there is widespread opposition in Italy to the austerity measures supported by the European Union (EU).  Investors are concerned that the third largest economy in the EU will scale back reform measures, which could increase the risk that Italy will default on its debt or leave the EU.  Investors shifted to safer assets, including U.S. mortgage-backed securities (MBS), which helped mortgage rates improve.

Topping the U.S. economic news this week was the implementation of mandated across the board government spending cuts on March 1st at midnight.  Government spending will be reduced by $85 billion over the next seven months unless action is taken.  While the cuts will slow economic growth to some degree, this represents just 2% of government spending, and the reaction in financial markets has been minimal.  Investors are looking ahead to the more significant March 27th deadline.  Last year, Congress passed a "stop-gap" continuing resolution to fund the federal government through March 27th.  New legislation must be passed before then to avert a government shutdown.

The biggest economic report this week will be the important Employment data on Friday.  As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month.

Stuart can be reached at 480.776.2954.