We think if the economy remains weak that we could see mortgage rates trail down and we think that we could see rates below seven percent into early next year.
Sentiment: NEGATIVE
Right now we think that rates will stay low, that you'll be able to get a mortgage below seven percent and that's kicked off a refinance boom that's going to put more money in the pockets of consumers.
Well, we're just now seeing the reductions in mortgage rates. The mortgage rates are based on the ten-year rate and the Fed controls the overnight or the shorter rates.
The crisis and recession have led to very low interest rates, it is true, but these events have also destroyed jobs, hamstrung economic growth and led to sharp declines in the values of many homes and businesses.
Should that worse scenario materialize, then most probably our propensity to increase interest rates will be weaker.
They flooded liquidity in the marketplace but the mortgage rate is based much more on expectations of inflation. So if the average investor believes that there is inflation coming, they'll move that rate up.
It would be helpful if someone would lay out exactly the economic mechanism that gets us from yet lower interest rates to actual economic activity.
And so the danger for the housing industry is if we see interest rates rise.
It is hard to be enthusiastic about the economy's prospects when house prices are falling: Households spend less, small business owners can't use homes as collateral for loans and local governments are forced to cut jobs and programs as property-tax revenue disappears.
We do see significant signs of a slowdown, in the economy worldwide.
Well, you know, we've got a lot of stimulus in the economy already from the tax cut, from the lowered interest rates, and also from the refinancing of mortgages.
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