BIG DECISIONS REQUIRE BIG INFORMATION

Most people are baffled by how government policy effects interest rates, particularly mortgage rates. The US government has had, since after the Great Depression, a policy that is designed to lessen the impact of a downturn in the economy, by increasing the money supply and lowering interest rates. Conversely, during periods of heated growth which can cause high inflation, the policy is to lower the money supply and raise interest rates. They have a number of tools at their disposal to help achieve these goals. The effectiveness of these policies is a matter of debate. But one thing is for sure, when the government artificially effects interest rates lower for a long period of time, the result can be unchecked inflation like we had during the 1980’s. Then,  the government has to over react to compensate and we have very high interest rates in order to combat that inflation. In 1983, when I got into real estate sales, the interest rates were nearly 18 percent.  Our recovery from the Great Recession of 2007 to 2012, has been the slowest in history. A recent report shows that still 32 per cent of Americans cannot break even after selling their current home and providing a down payment on their next home. This along with other weak economic indicators has caused the government to keep interest rates very low for a much longer time than it would normally. The point is that if you are considering a move in the near future and you want to take advantage of these historically low rates, now may well be the best time to do so. It is also important, as US citizens, to understand how these policies are planned and implemented by your government. I have included in my website, MnhomesbyDave.com, a very good article, under the Real Estate News tab, written by Kevin Graham of Rismedia.com, a respected real estate news site. The title is “How U.S. Monetary Policy Influences Mortgage Rates”.  It is a short article but is very, very long on content. Thanks for reading.

David Feerhusen

David Feerhusen

Broker/Realtor, CDPE, GRI, CRB
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