Posted on: 06th Nov, 2008 02:07 am
need to more specific answer.
Hi,
Interest rates are changed to influence the aggregate demand and target low inflation and high growth. If the interest rates are higher, then there will be an increase in the mortgage payments. This will make buying a house less interesting for the people. Due to high interest rates, lot of people will not be able to afford the mortgage and therefore will default on the payments. Thus, they will have to sell their house. This will reduce the demand for houses and therefore lead to lower house prices.
To know more about macroeconomics and its effect on refinancing, check the given link:
http://www.frbsf.org/publications/economics/letter/2003/el2003-29.html
Thanks
Interest rates are changed to influence the aggregate demand and target low inflation and high growth. If the interest rates are higher, then there will be an increase in the mortgage payments. This will make buying a house less interesting for the people. Due to high interest rates, lot of people will not be able to afford the mortgage and therefore will default on the payments. Thus, they will have to sell their house. This will reduce the demand for houses and therefore lead to lower house prices.
To know more about macroeconomics and its effect on refinancing, check the given link:
http://www.frbsf.org/publications/economics/letter/2003/el2003-29.html
Thanks