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How Does A Slow Economy Affect Mortgage Refinance Rates?

By Stacy Williams

How Does A Slow Economy Affect Mortgage Refinance Rates? Read below for the various ways that the slow economy will affect mortgage rates!

With so many people buying new homes and refinancing mortgage rates to take advantage of the low rates, many people are concerned that economic conditions will soon improve and low rates will be eliminated. The slow economy is affecting mortgage refinance rates a few different ways.

Less People Qualify For Refinance

The first way that the slow economy will affect mortgage refinance rates is that less people will qualify for a mortgage refinance. Due to the poor economic conditions, many people are unemployed or have a reduced income while others have underwater mortgages due to falling housing prices. Because of this, many people do not meet the refinance requirements. This lack of demand for mortgage refinances keeps rates low.

Fed Keeps Rates Low

The second way that the slow economy will affect mortgage refinance rates is that the federal government will keep rates low. When the economy is poor, the federal government will keep key interes rates low to encourage people to spend money. Mortgage interest rates are indirectly affected by these rates, so as long as the economy remains slow, the federal government’s low rates will keep the average mortgage rates low. As the economy improves, the rates will increase and mortgage refinance rates will follow.

Federal Programs Keep Rates Low

The third way that the slow economy will affect mortgage refinance rates is that the federal government is keeping mortgage rates low by investing in Freddie Mac and Fannie Mae. The government has sunk billions in these companies to prevent them from increasing their interest rates. Furthermore, the government has created programs that entice mortgage lenders to refinance their customers into lower rate mortgages.

Related posts:

1. What Impacts Does A Slow Economy Have On Mortgage Rates?
2. How Do Mortgage Interest Rates Affect The Economy?
3. How Do Federal Rate Cuts Affect Mortgage Refinance?
4. Will Mortgage Rates Work In Our Favor Once The Economy Steadies?
5. When And How Can I Get The Best Mortgage Refinance Rates?