Mortgage of Livonia, MI Real Estate could be more Expensive with U.S. Debt Downgrade

Will Livonia, MI real estate mortgages increase? That is one of the questions being asked by people in many places across the nation after the downgrade by Standard & Poor earlier this month. On Monday, August 8th prices rose for U.S. government debt. This, in spite of the downgrade, showed a sign of increased demand. However, the future is not certain due to this being a first for a credit agency to downgrade the ratings as well as the two – Moody’s Investors and Fitch Ratings – that retained their highest ratings.

Many types of borrowing by consumers are not directly linked to the credit rating of the government. However, there are potential consequences that may be felt by consumers purchasing Livonia, MI real estate. One involves two of the largest in the mortgage industry in the U.S., Freddie Mac and Fannie Mae. Both had their credit ratings downgraded. These two, combined, back or own about 50% of all mortgages across the country.

Those hoping to purchase Livonia, MI real estate will probably not see rates increase anytime soon. Nonetheless, they should inquire about locking in rates. Usually these fixed rate mortgages are linked to the 10-year Treasury bond yield. If the yield increases, it is usually followed by an increased mortgage rate. It does not seem that Treasury rates will increase due to the downgrade thus far.

One of the provisions of many home equity loans as well as adjustable rate mortgages is they are linked to the federal funds rate. This is a rate set by the Federal Reserve rather than the Treasury. According to the Federal Reserve they do not plan to raise rates in the near future. There are older loans in existence, although is it not certain how many still have adjustable rates. As a result of low interest rates, several Livonia, MI real estate owners refinanced using fixed rate loans.

In the meantime, Livonia, MI real estate owners with home equity loans could see a change in rates and their payments as the downgrade is absorbed by the markets. This is because they usually always have variable rates, which change more often than first mortgages.

If you would like more information about Michigan homes, please feel free to contact us at (734)-722-7244 or visit our Contact Us page where you can send us a message.  We’ll get back to you right away!