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Feds Expect A Weak Recovery And Anticipate Keeping Interest Rates Low

[Nov 24, 2009.]

 

Home Equity Loans Benefit from Low Interest Rates

As long as the Feds keep the Fed Funds Rate at between 0.0% and .25%, home equity loans will continue to be cheap loans. With interest rates as low as 3.25%, home equity loans are cheaper than a 30-year fixed rate mortgage. Whether or not the Feds decide to raise interest rates depends on the economy's recovery. The recession is officially over and economic news has been good, but the Feds have pledged to keep interest rates low for an extended period. This is great news for many home owners. Low interest mortgage loans mean more money left over for home owners to spend.

Feds Expect a Weak Recovery

In a recent statement issued by the Feds, they expressed concern that the economy will be weak for some time. Based on low expectations, the Feds believe low interest rates are warranted. Recent economic news suggests the economy is at least stabilizing.

  • US Dollar gains 0.7% against several other currencies.
  • Gold is up and crude oil is down.
  • Inflation remains at acceptable levels.
  • New unemployment claims are flat and continuing claims have dropped for the ninth straight week.
  • Housing prices seem to be stabilizing and are even up in some market.
  • Personal savings has increased.
  • The Dow Jones Industrial Average is holding above 10,000.

Unemployment Is the Reason

Despite good economic news, the Feds point to a high unemployment rate as the reason for a weak economy. The national average for unemployment is 10.2%, the highest it has been since 1983. Thirteen states report unemployment numbers higher than the national average with Michigan the worst at 15.1%. Until more jobs are created, fear will hold the consumer back from spending and growing the economy further.

Cheap Loans Should Be Available Into 2010

At some point it will make sense to refinance the adjustable rate of a home equity loan into a less risky fixed rate mortgage. At least for the foreseeable future, home equity loans at 3.25% are cheap loans for home improvements, debt consolidation, or almost anything that needs to be financed. According to many economists, interest rates on mortgage loans should remain low into 2010.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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