The Real Deal New York

Higher interest rates could dissuade people from refinancing

June 15, 2009 01:35PM

After
long-term interest rates hit a high for the year last Wednesday and
30-year fixed-rate mortgages now stand at 6.1 percent, hopes for an
economic recovery in the housing sector are diminishing as fewer people
are choosing to refinance. And with less people refinancing, housing
prices may fall faster than before. These higher interest rates may be
attributed to fears from investors that the U.S. government is
borrowing so much money, it will not be able to pay it back without printing
money. Arthur Laffer, chairman of Laffer Associates, said, “We can
expect rapidly rising prices and much, much higher interest rates over
the next four or five years, and a concomitant deleterious impact on
output and employment not unlike the late 1970s.”

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