Tags: Flanagan | oil | mortgage | rates

BofA Strategist Flanagan: 'Oil Collapse Key Driver' of Falling Mortgage Rates

By    |   Thursday, 18 December 2014 01:00 PM

Does the plunge in oil prices to five-year lows have anything to do with the drop of 30-year fixed mortgage rates to 18-month lows?

Yes, says Chris Flanagan, a mortgage strategist for Bank of America Merrill Lynch. "The oil collapse of 2014 appears to have been a key driver" of the mortgage-rate slide, he writes in a report obtained by CBS Moneywatch.

"Further oil price declines could lead the way to sub-3.5 percent mortgage rates." The 30-year fixed mortgage rate now stands at 3.71 percent, according to Zillow.

To be sure, it seems absurd to pin the mortgage-rate drop directly on falling prices. Mortgage rates are determined by Treasury yields, and those yields are sliding because of economic weakness and financial turmoil overseas.

So far the drop in mortgage rates hasn't done much to spark home sales, with new home sales rising only 0.7 percent in October from September.

"We have maintained the view that 4 percent mortgage rates are too high to allow for sustainable recovery in housing," Flanagan says. But a slip to the 3.25 percent to 3.5 percent range could do the trick, he writes.

Some experts express optimism about housing for next year.

Though 2014 has been "a disappointing year for the housing recovery, . . . our 2015 outlook points to a broad-based but measured housing recovery amid improving consumer sentiment, income growth, slowly easing lending standards and continued historically low mortgage rates," says Fannie Mae Chief Economist Douglas Duncan, according to Bloomberg.

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Does the plunge in oil prices to five-year lows have anything to do with the drop of 30-year fixed mortgage rates to 18-month lows?
Flanagan, oil, mortgage, rates
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2014-00-18
Thursday, 18 December 2014 01:00 PM
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