Lower Rates Mean Equals More Buying Power

Home owners who take advantage of lower rates and refinance save on average $150 a month which means they have more disposable income. Research shows that this additional money leads to lower debt on revolving accounts, more car buying and even higher employment in their locality.

A study conducted by the University of Chicago, Columbia Business School and Fannie Mae shows that consumers with lower mortgage payments are more likely to buy a car and qualify for a vehicle loan due to a more favorable income to debt ratio. In addition they are also likely to pay off credit card balances; a sound decision considering the fact that interest rates on credit card debt is significantly higher than mortgage rates.

Some analysts believe that lowering interest rates on a temporary basis for individuals in financial distress may be more favorable than forgiving the debt. However, the study showed that not much household spending was generated. One suggestion by academics is to have mortgages automatic reset to match current rates (view today's mortgage rates at loanDepot).

The study also found more local spending occurred in areas with a higher number of adjustable rate mortgages. As soon as rates dropped more money went back into local businesses such as grocers and restaurants.