Government shutdown not affecting interest rates, yet

The following is a guest blog from Jeffrey Heckman and Joanne Rotella with Shelter Mortgage Company and does not necessarily reflect the views of GeorgiaMoves.com

1. Of course, the big news last week was our country’s first partial government shutdown in 17 years! Surprisingly, though, the impact on the mortgage business has been minimal. The only big loss thus far has been the USDA rural housing program. Be aware that the longer the shutdown drags out, though, the more problems and delays will begin to occur.

2. The government shutdown’s impact on mortgage rates has also been minimal mostly because U.S. Government economic reports are not being released. The markets will be less volatile with less news being reported.

3. The first Friday of each month is usually notable for the reaction to the Employment report but, obviously, there was no report released on Friday. Investors were forced to adjust their outlooks based on the less significant ADP Forecast and Jobless Claims labor market reports which did come out last week and showed little change from recent readings.

4. This is a great graph which shows just how much jobless claims have dropped over the last 5 years. It is encouraging that the line is still going down…

Jobless Claims

 

 

5. Keep in mind that all of the delayed economic reports will all eventually be released when the shutdown ends creating the potential of a huge reaction by the markets to a lot of data in a short period of time. Don’t be surprised if the rate stability over last few weeks is replaced by a roller-coaster of activity once the shutdown is over.

6. A final point about the shutdown is that it is a problem but not the big problem. The much more significant issue is the debt ceiling. According to the Treasury, the government will reach its borrowing limit around October 17. If Congress does not raise the limit, there is a risk that the government technically will default on its obligations. The results of this unprecedented event could be severe for the economy and financial markets. At this point, though, few investors believe that Congress would actually allow the US to default. Let’s hope they are right….

Rate Update
Congress failed to reach a budget deal for the new fiscal year, causing a partial government shutdown for the first time in 17 years. The impact on mortgage rates has been surprisingly small, though. The reduced number of economic reports released last week caused little reaction. Mortgage rates ended the week a little lower. The benchmark Conforming 30 year fixed-rate is down to 4.25%.

This Week
Investors will continue to follow the budget and debt ceiling discussions this week. If the shutdown is not resolved, most of the economic reports scheduled for this week will be postponed, including Friday’s Retail Sales and Producer Price index data. Unaffected by the shutdown, the Minutes from the September 18 Fed Meeting will be released on Wednesday. These detailed Minutes provide additional insight into the debate between Fed officials. In addition, Treasury auctions are scheduled for Tuesday, Wednesday, and Thursday.

 

For more information or to get pre-qualified for a mortgage, please contact Jeffrey Heckman with Shelter Mortgage Company at 404-277-6044 or jeffrey.heckman@gbmail.com or Joanne Rotella at 404-290-4800 orJoanne.Rotella@gbmail.com

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