Exactly a week ago, I read an article USA Today posted by the concerned citizen Dennis F. Paulaha. He makes one of the greatest points and offered an incredible solution to halt our downward spiraling economy.
His idea states that the US government offer every US citizen a 30-year fixed rate mortgage of 1.5%. All financially qualified (new standards) citizens could have the ability to finance a current or new mortgage at this low interest rate. Currently, the government is lending billions of dollars to firm across the country at low interest rates. Why not lend it to the people.
Paulaha believes this plan will work and benefit many areas of our economy.
1. It will stop home prices from falling. It should prevent many foreclosures and turn the housing market around.
2. It will cause everyone with a mortgage to save tons of money a month which as we all know will cause us to spend more. Americans spend money. Face it, we are not the best at saving. Here is his example. If you refinance a $200,000 mortgage at 7% to 1.5%, then the monthly payment will go from $1330 to $690. That is a saving of $690 per month. Now, can you imagine receiving a stimulus check like most of us did last April every month! We will all take these saving and invest it back into our economy, thus, stimulating it greatly.
3. It will increase credit availability. After mortgages are refinanced, mortgage holders will have a massive influx of cash and capital. This will help them to de-leverage which will help their capital ratios. Also, now that everyone have cheaper payments, they will have more money. Now, citizens will be more qualified for more credit. This will help to stimulate the economy by starting with the people rather than government.
4. Now that everyone with a mortgage will have more purchasing power, they will begin purchasing. All of this increased purchasing will create a need for companies to produce more. In order to increase production, jobs must be created.
5. Families that would like to purchase a home can now afford it. Currently, there are tons of reasons to buy real estate today. There are even more benefits as a first time buyer. If these low interest rates cannot get someone off the fence, then nothing will.
6. The national deficit will not increase. There will be no spending. Mortgagee would actually being paying the government back.
7. Lowering rates will turn around the economy and create massive tax revenues by all the spending which will begin to reduce our national deficit.
I believe that this idea of lowering mortgage rate is a huge key to the turnaround for our economy. Finally, Uncle Ben and Hank Paulson got it right. 1.5% is actually a little outrageous. I think that if rates could come down to 3.5% or even 4%, then there would still be plenty of room growth. The Fed actions to continue to buy even more mortgage backed securities was a great step in the right direction.
Thank you Uncle Ben and Mr. Paulson for helping to spark our wonderful industry and save our great nation!
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