Deflationary environment would lower mortgage rates
You’ve probably never heard of Nouriel Roubini but you may want to start paying attention. Along with Peter Schiff he basically called the subprime mortgage crisis before the term even existed. He is getting a lot of attention lately in the media.
In this article published on Forbes.com he lays down the argument that the US economy will experience deflation in the next 6 months. Although there are many scary macro-economic implications of such an event there is a silver lining for mortgage rates.
Since we know that higher inflation causes mortgage rates to increase, it can also be said that deflation causes mortgage rates to decrease. In fact, much of the credit for low interest rates following 9/11 has been appointed to concerns of deflation.