Dive Brief:
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Although most economists have predicted that mortgage interest rates will rise in 2015, a sharp drop in oil prices could keep them low and even force them to drop.
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Analysts at Bank of America Merrill Lynch said there’s a good chance mortgage rates could drop to as low as 3.25% --a level they said could “get housing back to affordable levels for many”—as oil prices decline. Current interest rates, which have been teetering around 4%, are too high “to allow for sustainable recovery in housing,” the analysts said.
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Real estate and housing industry economists have uniformly predicted that mortgage rates will increase to the neighborhood of 5% some time in 2015, but those forecasts did not take crashing oil prices into account.
Dive Insight:
The quick decline of crude oil prices could affect more than mortgage rates. Oil-producing states have created high-paying jobs, which has spurred home buying, construction of retail and office space, consumer spending, and thriving local economies. A crashing oil economy could lead to a layoffs and the impact of more unemployment in the still-thriving oil communities.