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How the Greek Economy Impacts Your Mortgage Rate

You are flipping through the nightly news and you see that the Greek economy has gone into a tailspin since . . . well, since that Alexander the Great guy was in charge. In June, things came to a head for the Greek economy: Greece shuttered its banks for six business days, imposed capital controls and missed a 1.6 Billion Euro payment to the IMF. As news coverage showed crowds of people flooding ATMs – daily withdrawals were limited to $66 – most of us had two questions: “Are these pictures of Greeks waiting for the ATM real? Not a single person is wearing a toga?” and “How does this impact me?”

While the first question still baffles us too (everyone knows that Greeks only wear togas), the second question is much easier to answer. The crisis in Greece drove mortgage prices a bit lower. As fear over a possible Greek default grew in Europe, investors flocked to American mortgage-backed securities; lowering the average rate for a 30-year fixed mortgage from 4.04 percent to 4 percent. Despite the bad rap that mortgage-backed securities have had over the past decade, they are still seen as safe investments – especially during volatile times.

However, as investor anxiety over Greece’s economic turbulence subsided in the wake of European Union bailout talks and the Greek Parliament’s approval of a pension overhaul, and tax increases, rates quickly rose to 4.09 percent - the highest rates since last October. This is great news for the global economy – and the Greek economy in particular – but it goes to show how keeping your pulse on swings in the economy throughout the world can go a long way towards getting the best possible interest rate on your next mortgage.