Global economic troubles are making mortgages more attractive

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As the world struggles to maintain economic growth, the cost of borrowing is plummeting in the U.S.

As we reported earlier, the average rate on a 30-year mortgage in the U.S. fell to 3.62 percent after nearly six weeks of steady decline. According to a report from the Associated Press, the decrease in mortgage rates surprised industry experts in light of the Federal Reserve’s December decision to raise short-term rates for the first time in almost 10 years.

The continued drop in mortgage rates in the U.S. have some people worrying that we may be teeing up for a repeat of 2008’s bubble crisis, the underlying factors surrounding the drop may be a bit more complex.

Analysts say that while the available housing stock is on the drop as people snatch up homes across the country, there are a number of precarious economic situations around the globe that could be influencing things at home.

The price of oil has dropped to historic lows in recent months, largely due to increased production from OPEC states. While this has offered relief to many Americans at the pumps, it may be having a negative effect on oil producing states like Texas, Louisiana, and North Dakota, causing housing values to drop as production slows and workers are laid off.

China’s economy has been faltering as well, with its growth rate dropping from 7.3 percent to 6.9 percent in 2009. After the country underwent a massive period of economic expansion, becoming even more intertwined with the U.S. economy, troubles in the country’s stock market have left investors scrambling to find more reliable opportunities.

Strange things abroad have had American officials scratching their heads at what to do. Federal Reserve Chair Janet Yellen traditionally advocated a gradual increase in mortgage rates, but at the most recent meeting the decision to hike short-term rates appeared to only drive long-term rates down lower.

A press release describing the Federal Reserve’s December decision to hike interest rates can be found here.

Daniel J. Brown

Daniel J. Brown (Editor-in-Chief) is a recently retired data analyst who gets a kick out of reading and writing the news. He enjoys good music, great food, and sports, with a slant towards Southern college football, basketball and professional baseball.

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