The European Central Bank And U.S. Housing

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Peoples Home Equity informs readers of what potential effects the European Central Bank's upcoming interest rate decision may have on the U.S. housing market.

News Image ECB cut would alleviate some concern over Europe fragile economy.

Peoples Home Equity thinks this week’s economic meeting may have a dramatic effect on interest rates in the United States.

On Thursday, June 5th Mario Draghi the president of the European Center Bank (ECB) will meet with fellow policy maker to decide on what to do with interest rates in Europe. A rate hike would put even more pressure on the Federal Reserve to raise rates by the end of its current program of tapering quantitative easing. Fortunately, the ECB is planning the opposite plan. The ECB is leaning towards cutting European interest rates and loosening credit on Thursday. If this action takes place, equity markets may continue their rise higher and the U.S. housing market may see 30 year mortgage continue trending near 4%.

Peoples Home Equity thinks an ECB cut would alleviate some concern over Europe fragile economy and allow the Federal Reserve to continue assisting in the housing recovery with low rates. Home prices also tend to follow equity markets as both are intertwined in the overall health of the U.S. economy. If the ECB cuts interest rates which pushes equity markets higher then housing home prices may see further tail winds to rise higher. Then again, a rate cut from the ECB may have no effect on the U.S. market. An ECB rate cut may be relieving for European markets but neutral for the U.S. After all, the Federal Reserve wants to raise interest rates in America regardless of the global economy. The U.S. has much lower interest rates than Europe, or the BRIC countries and can afford a bit of a rate hike.

Peoples Home Equity encourages readers to stay tuned on Thursday this week to see both what the ECB decides and the effect its actions may have on the U.S. housing market.

If interested in securing a competitive, lower rate mortgage, consider speaking with a Peoples Home Equity loan officer today for details at: 262-563-4026.

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Giorgio U Ferrero
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