What effect does a falling dollar enjoy on mortgage rates?
Answers:
The Falling Dollar have Zero effect on Mortgage rates because currency valuations only apply to Import/Export of Goods/Services.
A falling dollar might impact the cost of your house because parts are made contained by Germany or China. But your mortgage (ie: The Lending of Money by the Bank) has no impact on the foreign exchange rate.
That all depends on the situation. The forces that impact the currency market really have no impact whatsoever on mortgage rates. Why? Because mortgage rates are based on the prime rate. And currency values own nothing at all to do beside the prime rate.
However, the reason why the dollar is falling and why mortgage rates are dropping could be the same or similar.
For instance, if consumers feel the economy isn't good and/or will verbs slumping, then that could make foreign investors edgy. So they may shy away from the dollar, causing it to drop.
And when consumers don't feel jolly about the state of the economy, they will tend to tighten their belts and spend smaller quantity to ride it out. And that means they won't be in the marketplace to buy a house. Mortgage lenders may have to drop their rates as an incentive to convince consumers to buy.
So consumer perception of the overall economy could effect both the dollar and mortgage rates.
But consequently again, it might not. Foreign investors may not feel the same method as US consumers. So foreigners may continue buying dollars because they think the reduction isn't slumping, isn't as bad as consumers feel it is, or the slump won't be as impossible as consumers think.
And this is what makes economics both fun and exciting. It's adjectives a matter of how you read things and perceptions.
It depends upon the impact of the fall on inflation. Generally a falling currency is the result of expected inflation relative to other inflation rates, and since inflation erodes the purchasing power of future dollars, it erodes the worth of future mortgage payments. As such, mortgage lenders would need complex rates of interest to offset the loss of purchasing power. If the fall be due to higher inflation in the adjectives then it will result in sophisticated rates, but that assumes other factors are held constant, and they won't really be held constant.
If the perception is that the dollar is falling further in the adjectives, the lender wants more money in the adjectives in exchange for a given amount today. so that would mean mortgage rates would be better.
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