Missing Out on Low Interest Rates

Many who might benefit from current interest rates are missing an opportunity, argues Nick Timiraos in the Wall Street Journal. "U.S. consumers and businesses have enjoyed ultralow borrowing costs since the financial crisis because the Federal Reserve pinned interest rates near zero. At the same time, regulators and lenders intent on fortifying the financial system have clamped down on risk-taking, making it harder for many borrowers to get loans." It's indisputable that people are buying fewer houses or simply less house, "Single-family home construction accounted for 2% of gross domestic product, on average, during the 1990s. It has averaged just 1% of GDP since the recession ended in 2009," reports Timiraos.

These regulations were put in place to pull risk out of the housing market, "Congress responded in 2010 by passing the Dodd-Frank Act, which created the new Consumer Financial Protection Bureau, and asked it and other regulators to flesh out several new sets of rules, including requiring lenders to ensure borrowers have the ability to repay loans," Timiraos writes. One knock-on effect of removing this risk has been  increased difficulty for some to get the credit they would need to buy houses or to shrink the size of loan they could get. That means while some home buyers will miss out on some possible benefits from the country's low interest rates; some of these borrowers may also be missing out on bankruptcy.