July 26th Moorings Column

Hello and welcome to this week’s edition of Moorings. Once again the main topic of conversation continues to be the United States Debt Ceiling which has still yet to be increased. The heat is definitely on legislators on both sides of the political aisle to come to a compromise and put this issue behind us. It only takes a look at what is happening in Europe these days to understand why it’s crucial that the United States finds a solution to the debt ceiling issue. Not only have eight European banks recently failed a stress test, but last week there was news that Greek, Italian, Portuguese, and French “credit default swaps” (which are insurance policies against default) were trading at record levels. While the European Union is continuing to work to contain Europe’s debt problems and prevent a default in Greece (and elsewhere), these events bode a very important lesson for the US.


Why? Because solving our debt ceiling debate and finding a long-term plan for lowering our deficit and being fiscally sound will raise confidence in our debt and help the US keep its AAA credit rating from the various credit rating firms like Moody’s and Standard and Poor’s. This will help investors continue to see the US as the ultra-safe haven for their money, which is a key aspect of our continued economic recovery.


Speaking of our economic recovery, there was actually some good news last week in the housing industry, as Building Permits and New Construction Starts were reported better than expected. While this is only one small piece of the puzzle, we’ll take every bit of positive news we can.


With that being said, interest rates continue to be at their lowest levels ever. A client looking to purchase or refinance a home with a thirty year fixed conventional mortgage can expect an interest rate of approximately 4.75% as of Monday. While this is a slight quarter percent jump from last week’s low of 4.5%, this is still a huge bargain for anyone looking for a home loan. It astounds me that we still have clients calling up who haven’t already refinanced their home when their rate is in the fives or even occasionally the six’s. The savings they get on a yearly basis is often in the thousands of dollars, not to mention the tax-benefit. Speaking of which, I thought I would bring up a conversation I recently had with a friend who wanted to pay off their thirty year mortgage as quickly as possible. He had a plan to pay it off in seven years by doubling up on payments and refinancing to a fifteen year. While this may be best for some, I would highly recommend that anyone considering paying off their mortgage talk to their CPA or tax specialists to determine if it’s really in their best financial interest. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.