Essay About Low Interest Rates And Wall Street Journal Online

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The home mortgage market was in the news last week as Bank of America Corp. agreed to purchase Countrywide Financial Corp. for $4 billion dollars. Most Americans are aware that the housing and mortgage markets have been in a downwards spiral for the past few years. Moreover, a large and financially stable company like Bank of America flexing its power and now having a combined market share of about 25%, can be a good thing for potential homebuyers and sellers in the new year. In The Wall Street Journal Online, Susan M. Wachter, a finance and real estate professor at the University of Pennsylvania’s Wharton School says, “Bank of America stepping in right now is a very good thing for the market because it signals confidence in an eventual revival of the housing and mortgage markets from what appears to be the worst slump since the Great Depression.” Because of this financial stability, consumers can rest easy that their lender will not be going out of business anytime soon. Small lenders and brokers have been on a steady decline over the past year because there has been much less business, and because they cannot sell the loans that they originate because the banks do not want to take the risk. At the beginning of the decade, Americans were refinancing at a very fast pace with small broker and small lenders getting rich in the process. This was mostly due to the extremely low interest rates that the government kept lowering to help a slumping economy, and the fact that we liked the idea of refinancing our mortgages and getting some money back in return. However, many of those loans went into default and now larger banks are more careful and much stricter in their lending. The downside to all of this is that the larger banks will now be able to increase their costs to consumers because of less competition