Lower gas prices = lower mortgage rates

Posted on January 20, 2015 by Rory Mark Schmer from South Florida

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Lower gas prices = lower mortgage rates

WASHINGTON – Jan. 19, 2015 – The drastic drop in oil prices could put downward pressure on mortgage rates. The U.S. EnergyInformation Administration (EIA) reported that the price of regular gasoline was $2.13 per gallon – its lowest point since a peak of $4 per gallon in May 2011. EIA estimates that the savings could amount to $550 per household in 2015.

"Lower oil prices mean a lower inflation rate, which pushes down mortgage rates," economists note at the National Association of Realtors^®' (NAR) Economists' Outlook blog. Indeed, the 30-year fixed-rate mortgage averaged 3.66 percent last week – the lowest average in 20 months – according to Freddie Mac's weekly mortgage market survey. 

Taking into account the median home price of $205,300, a 0.75 percentage point drop in mortgage rates could yield a savings of about $1,000 annually, according to NAR researchers.

5800 N Bay Rd Miami Beach Listed for $40 Million 

"What this means for Realtors: The decline in oil prices is generally positive to households by way of the gas savings and lower mortgage payments," economists note. "That savings will boost consumer spending in other areas. But there may be some layoffs in oil-producing states." The lower oil prices may prompt revenues to flatten out in some oil-boom areas, notably North Dakota and Texas. It shouldn't have a measurable impact in Florida.

Source: "Recent Oil Trends and What They Mean for the Housing Recovery," National Association of REALTORS® Economists' Outlook Blog (Jan. 12, 2015)

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