The Real Deal Miami

Low mortgage rates fail to spur borrowing: VIDEO

October 25, 2012 02:15PM

Do low mortgage rates actually motivate borrowers? The affordability of getting a loan is not spurring consumers to borrow, despite the Federal Reserve’s efforts to hold mortgage rates at record lows, according to Sentinel Investments data cited by Bloomberg News. (see video)

“Americans are still de-leveraging,” Bloomberg’s Michael McKee said. “They are not enthusiastically buying into a recovery, yet. Mortgage rates have been going down for a long time, and it hasn’t influenced behavior.”

One explanation, Bloomberg’s correspondents suggested, is that all-cash buyers are distorting the market place, while “Generation Y” is too burdened down with student loan debt to afford a home. Another reason for the fall in applications could be that housing prices have fallen so much that the size of the mortgages is also significantly lower. [Bloomberg] –Christopher Cameron