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Collateral Damage Could Include Higher Mortgage Rates

Mortgage markets in the U.S., which remain on government life support, could be rattled by the downgrade of the U.S. credit rating, potentially raising borrowing costs for consumers.

Given the "sufficiently perilous" state of the U.S. mortgage market, a downgrade "can do nothing but harm the market," says Karen Shaw Petrou, managing partner of Federal Financial Analytics, a research firm in Washington. "The question is how much?"