Economists expected interest rates to rise dramatically in 2010.
It hasn’t happened. They’ve stayed at record-low levels.
The federal government has a huge deficit. Why isn’t this demand for funding driving up interest rates?
How will this affect the housing market?
That interest rates have declined is good news in many respects. “There are,” said Sal Guatieri, senior economist at BMO Capital Markets, “always people who have jobs who can take full advantage of lower interest rates to borrow and spend.”
But that impact now may be weakened by two factors, perhaps increasing the need for fiscal stimulus.
First, there are many who will not be helped. Homeowners with ample equity and income can refinance their mortgages at record low rates, which fell to 4.4 percent last week. But millions of homeowners either lack sufficient income or have houses no longer worth what is owed on the mortgage. They cannot refinance.