Surge in Home Loan Rates Will Hurt Economy

If cheap mortgages have kept the economy afloat, the economy may have just sprung a leak.

A little more than a month after the Federal Reserve reduced its overnight lending rate to just 1 percent, mortgage rates have shot up as investors have soured on the bond market — in part because of confusion about the Fed's intentions in managing the economy.

Though many economists contend that big government deficits eventually lead to higher interest rates as the government begins to crowd the markets with its huge borrowing needs, most analysts say the recent surge in interest rates is not a result of the newest news on deficits.

Note the key word "most." You will hear more about deficits and interests rates in the coming months.