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Markets React to Fiscal Cliff Talks


The main influence on mortgage rates this week was the perceived progress, or lack thereof, on the fiscal cliff talks. US economic data and news from Europe had little impact. Investors grew a little less hopeful during the week about a fiscal cliff deal, so mortgage rates ended the week lower.


If no action is taken, a series of tax increases and government spending cuts will take effect at the first of the year, known as the fiscal cliff. During the week, political leaders from both parties made a series of statements about the changing status of negotiations to avoid the fiscal cliff. The result for financial markets was increased daily volatility in the stock and bond markets. Opinions vary widely on the level of progress, but investors ended the week with reduced optimism for a deal. As long as the talks drag on, the increased level of volatility is likely to continue.

If Congress is not able to reach a deal to avoid the fiscal cliff, economic growth can be expected to slow significantly. However, slower economic growth generally reduces inflationary pressures and is positive for mortgage rates. Therefore, as optimism for a deal rises and falls, so do mortgage rates.




Also Notable:  

  • Third quarter GDP was revised higher to 2.7% from 2.0% 
  • Pending Home Sales rose 5% to the highest level since March 2007 
  • Consumer Confidence rose to the highest level since February 2008 
  • European officials reached an agreement to ease the debt burden on Greece 



Average 30 yr fixed rate:
Last week:
This week:
Stocks (weekly):



Week Ahead 

The biggest US economic report next 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. Before the employment data, ISM Manufacturing, and Construction Spending will be released on Monday. Productivity and ISM Services will come out on Wednesday. Consumer Sentiment is also scheduled for Friday.



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Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.