A lot has been happening lately in the economy. Last week the Federal Reserve announced they were going to launch something called Operation Twist. The Fed, worried about unemployment, is trying to lower long-term interest rates, hoping that this action will encourage people and businesses to borrow and spend. Right now, short-term rates are pretty close to zero, but the Fed is worried about long-term rates and wants to lower those long-term rates – that’s because mortgage and loan rates are often tied to long term rates. If mortgage rates drop, people who might not have qualified for a loan before may now – after all, as interest rates go down so does the interest on a mortgage, which in turn lowers your PITI and helps you qualify for a loan.
National Public Radio (NPR) put together a podcast, “Fed’s ‘Operation Twist,’ Explained in 4 Easy Steps” that does a great job at explaining what the Fed is up to. It’s only about 4 ½ minutes long, so take a listen.
- How will lowering long-term interest rates help the housing market?
- Why is it so important to our economic recovery efforts to get the housing market back to life?
- What is happening in your area in housing – prices of homes, home sales, and foreclosures? Be prepared to discuss this in class.