According to the Mortgage Bankers Associations the mortgage rates are historical low causing a boost in in mortgage applications. The recent sequester cuts made citizens feel threatened and financially insecure and a sudden drop in mortgage rates might have caught their interest. However the increasing mortgage applications do not pose an economic threat. On the contrary, they are lending a hand to the dysfunctional housing market.
When first hearing about the mortgage applications increasing a number of individuals can’t help but think that American citizens are not struggling and are able to maintain their lifestyle. However on a closer examination, keeping resources in the bank will only impede the economy.
In order to have a steady economic system it is imperative for money to circulate. Granting people loans give them the ability to spend more, which consolidates the system. The fact that mortgages have become cheaper means that housing prices will increase again. This will make homeowners feel more secure and encourage them to spend more and thus improving the economy.
For some time people have been debating the strict bank policies regarding loans. It is believed that while the financial institutions were being cautious, they were also holding the economy hostage in the financial turmoil.
Some might argue that even if the rates have decreased the loaning criterions are still too strict and few people are considered eligible. Of course it is somehow necessary to impose strict rules otherwise the banking system will give birth to another economic crisis before we even have the chance to digest the current one. If we don’t encourage spending we will never see the end of the current crisis.
The mortgage rates becoming cheaper can be a good sign but it is not enough to restore the economy. Jobs are a vital part of the economy and the current situation remains grim despite the current job reports. The sequester cuts could mean that thousands of people will find themselves without a job.
The U.S. economical scene is very unstable and it may be far from recovery. The fact that America’s debt has almost reached the legal limit is a sign of a troubled and broken system beyond repair. Let’s just hope that now there’s no other way to go but up in the coming months.