Oil's crash could lower rates

by MPA15 Dec 2014
While many economists are predicting a rise in mortgage rates in 2015, Bank of America Merrill Lynch analysts are forecasting differently.

According to recent report from BofA Merrill Lynch, the sharp drop in oil prices could keep mortgage rates low and even force them to drop to as low as 3.25%. A level that analysts said could “get housing back to affordable levels for many,” as oil prices decline.

The National Association of Realtors recently predicted the 30-year fixed-rate mortgage will reach 5% by the end of 2015. (It's currently averaging 3.89%, according to Freddie Mac).

Crude oil hit a five-year low close to $60 a barrel on Monday, according to Reuters. Oil prices have collapsed over the last six months as high-quality, light crude from North America has overwhelmed demand at a time of lackluster global economic growth.

The quick decline of crude oil prices could affect more than mortgage rates. Oil-producing states have created high-paying jobs, which has spurred home buying and thriving local economies. The decline in oil demand could lead to a layoffs and more unemployment in these oil communities, according to ConstructionDive.com.