Mortgage rates rise after U.S. credit downgrade

23ABC News

Mortgage rates were already ticking upward and with the recent U.S. debt downgrade, that number is climbing even further. Amanda Sansone has a look at the impact that's having on the housing market and what it means for borrowers.

Transcript

00:00 Welcome back, everyone. Mortgage rates were already ticking upward and with the recent

00:05 U.S. debt downgrade, the number is climbing even further.

00:08 In today's Consumer Watch, Amanda Cimson has a look at the impact it's having on the housing

00:12 market and what that means for you.

00:16 The housing market taking another hit. According to Bankrate, the average rate for a 30-year

00:21 mortgage rose to 7.09 percent last week after credit rating agency Fitch downgraded the

00:27 U.S. debt rating from AAA to AA+. This overworries that the U.S. won't fulfill its debt obligations.

00:34 We feel like, you know, that the other underlying metrics have deteriorated to such an extent

00:39 that it's no longer consistent with the AAA.

00:42 Economists say higher mortgage rates mean consumers will have to pay more for the same

00:47 house. Those higher costs are sidelining some would-be homebuyers, but demand is still high.

00:53 One economist says that's because inventory is too low.

00:56 We sort of have a housing shortage in the country. We need to build a lot more homes

01:00 over the next decade to catch up with the shifting demographics and the actual demand,

01:06 especially amongst those first-time homebuyers.

01:08 Fitch's decision to drop the U.S. credit rating last week is having a ripple effect. Mortgage

01:13 giants Freddie Mac and Fannie Mae also saw their ratings fall slightly. And all this

01:18 could make it even harder for U.S. consumers to find a home they can afford. Several leading

01:23 economists have denounced Fitch's downgrade, citing cooling inflation and other positive

01:28 indicators. Meanwhile, former Treasury Secretary Henry Paulson says the debt is not an immediate

01:33 worry.

01:34 The longer term, it's a major concern. There's no example in history of any major power continuing

01:41 to be a power where they lose their fiscal strength.

01:44 For Consumer Watch, I'm Amanda Sansoni.

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