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TEXT OF INTERVIEW
Scott Jagow: Time to visit with our Economics Correspondent Chris Farrell. We were chatting yesterday, and Chris told me that within an hour of the Fed cutting interest rates on Tuesday, he was getting e-mails about refinancing his home. What’s that all about, Chris?
Chris Farrell: I don’t know who these people are, where they are — it’s like they were sitting at their computers, the Fed cuts rates, boom, boom, boom — they type in. Chris, what should I do? Is it time to refinance?
Jagow: So the big question on a lot of people’s minds is: Can we really expect that this rate cut will spill over to mortgages fairly soon, and that it will get people buying homes?
Farrell: Well. the way that I look at it is it’s positive news for the mortgage market, it’s positive news for homeowners. It’s especially good news for those homeowners who have good credit scores. However, it’s not going to stop us from going in recession, it’s not going to stop home prices from continuing to decline somewhat. I don’t think that it’s going to convince a lot of people that now is bottom in the housing market. But what I do think it will do is it’ll shift the mind set of a number of homeowners from, “Boy, this is really a bad situation,” to “Hey, you know what? I can take advantage of this situation to improve my financial circumstances.” So it’s part of the process of healing.
Jagow: But I remember not too long ago, Chris, when people were complaining about homeowners using their houses as ATM machines. Are we going into another cycle here by doing this?
Farrell: You know, that’s a theme that’s out there, and that’s a risk, and you hear it being expressed this way: “Ben Bernanke, that Fed chairman, he’s bailing out his friends on Wall Street.” But you know those e-mails that I got? People weren’t talking about treating their home as an ATM machine — something that we’ve talked about a lot in the past. They were talking about, you know, restoring their finances, a more conservative financial picture. I think we are moving toward a more conservative financial picture — and frankly, I don’t think that financial institutions are going to lend to the consumer the way they did before. What this cut in rates is doing is limiting the downside. It’s preventing a collapse in financial institutions, preventing a collapse in households. But we’re not going back to bubble mania any time soon.
Jagow: All right, Chris, we’ll check back with you on this stuff, I assure you.
Farrell: I know you will. I look forward to it.
Jagow: Chris Farrell, our economics correspondent. In Los Angeles, I’m Scott Jagow. Thanks for listening, and have a great day.
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