Some analysts are concerned that the downgrade of the U.S. credit rating by Standard & Poor’s will result in a downgrade of Fannie Mae and Freddie Mac, which in turn could boost taxpayer losses or inflate mortgage rates. Others do not expect much fallout, given that the balance sheet of the U.S. government continues to support agency debt and has not degraded in response to the downgrade. Even those concerned about mutual funds or foreign investors selling agency debt to comply with capital requirements believe it might not be an issue because there is little else in which to invest their money.
Time will tell… over the past weekend, some (but not all) news reports speculated that mortgage rates would ultimately start rising because of the downgrade.
[SOURCES: Wall Street Journal; Information, Inc.]