While the long term impact of the U.S. credit downgrade from AAA to AA+ rating is unclear at best, the immediate outcome was quite favorable to mortgage lending. On Monday, interest rates fell to their lowest levels this year at 4.25% for a 30-year fixed rate mortgage.
Also on Monday, the credit rating agency Standard and Poor’s (S&P) downgraded mortgage finance giants Fannie Mae and Freddie Mac to AA+. "The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government," S&P said in a statement.
It remains to be seen what if any affect the downgrades will have on mortgage interest rates. Some speculate interest rates will spike, yet immediate market reactions are anywhere from muted to favorable. One thing is certain, mortgage interest rates are very unlikely to improve. Only time will tell what rates will do in the coming weeks and months ahead.
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