There have been plenty of negative headlines this year — COVID-19, recession, civil unrest and more. The one constant positive throughout the majority of 2020 has been the lowest interest rates in history. These historic low rates continue to support the recovery from this COVID-induced recession. The beneficial effects of low rates can be seen in several sectors of the economy.
For one, it is unlikely the stock market would have rebounded so quickly without the influence of low interest rates. While low rates make it more affordable to borrow, they are a disincentive against putting money in the bank. Stocks become more attractive as an investment vehicle when individuals and institutional investors cannot make returns in other sectors. In turn, a rising stock market gives consumers confidence regarding the future of the economy and confidence is a key component of any economic recovery.
Of course, the biggest beneficiary of low rates is the real estate market. Real estate has out-shined other sectors of the economy as the recovery has progressed. Americans realize that sub-3.0% rates on home loans have made owning real estate more affordable and they are buying so quickly that inventory remains historically low. Others are refinancing, freeing up capital. But like the stock market, the real effect of this movement is confidence. Buying a home is all about the future and Americans remain confident in their future. The ability to own a home is one of the great principles of our economy and country — and today Americans are buying-in big time.
Dave Hershman is the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School. Want to send this commentary and other news in a personalized format to your sphere database or on social media? Sign up for a free trial at www.OriginationPro.com.