Possible Recession in the Near Future: The Potential Result

As you may have seen on the internet the past few days (from news, social media, or other areas of information), the Federal Reserve has lowered its interest rates and increased mortgage rates.

According to Market Watch, “The 30-year fixed-rate mortgage averaged 3.78% during the week ending Oct. 31, up three basis points from the previous week, Freddie Mac FMCC, -2.70%   reported Thursday. It’s the first time since April that rates have risen in three consecutive weeks. Despite the increase, the rate on the 30-year mortgage remains over a full percentage point lower than at this same time a year ago. The 15-year fixed-rate mortgage increased one basis point to an average of 3.19%, according to Freddie Mac. The 5/1 adjustable-rate mortgage averaged 3.43%, up three basis points from a week ago.”

This could lead to a potential recession. If the mortgage rates were to increase more rapidly and interest rates continue to decline, then a recession would happen (similar to the Great Recession of 2008). This was when there was a global economic crisis and the stock markets crashed. Something similar to this could potentially happen here.

What does this mean for us citizens? Most people usually finance their homes/real estates through mortgage loans and are left to pay off the loan with interest rates (different rates vary depending on location and the type of home/real estate purchased). If these mortgage rates keep increasing, people will more than likely start to pay little to nothing because of these rates, it will be too expensive, resulting in the Federal government not receiving the money from these rates.

Arbitrations:

Passy, Jacob. “Mortgage rates increase again — even though the Fed just cut interest rates.” https://www.marketwatch.com/story/mortgage-rates-increase-again-even-though-the-fed-just-cut-interest-rates-2019-10-31. Published October 31, 2019. Accessed on October 31, 2019.