It is clear that the European financial situation has helped to keep interest rates low. Investors are unsure about banks who report heavy losses in many European countries. When they decide to invest in American products, interest rates drop further. This is why it is important for smart consumers to stay mindful of world events. Let’s have a look at some of the particulars of the stress test European banks undertook last week.

Of the 91 banks tested only 7 failed. While 5 of these were small Spanish banks, two were larger lenders: Hypo Real Estate (Germany) and ATEBank in Greece. All other major European banks passed. Throughout Europe these tests were seen as a success, showing that even in a high stress financial situation, it is unlikely that many banks will crumble.

So what does that mean for American Homeowners?

Just like the debt crisis in Greece and the rest of Europe helped to hold interest rates down, improvement in European markets will help to bring interest rates back up. With marginal success and continuing uncertainly overseas, it is unlikely that the findings of the stress test will alter rates much. In the coming weeks, however, I would not be surprised if rates hung around current levels, rather than dropping. 

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