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Mortgage rates, Oil, and World Economies: What is Going on Out There?

Mortgage rates, Oil, and World Economies: What is Going on Out There?

Mortgage rates, Oil, and World Economies: What is Going on Out There?

You’d be hard-pressed to find a borrower that didn’t depend on oil in some way, whether it be for driving or heating fuel.

Oil prices, and the events around the world that move them, are indeed hard to track – but if our clients want to obtain a basic grasp of what moves rates, oil is among the factors.The drop in oil prices will have an overall positive impact on the economic activity within the U.S. but a negative effect on oil dependent economic states such as Texas and North Dakota. Most areas in which Nations Lending loans are not dependent upon the health of the oil business, so, in general, any negative impacts are outweighed by the savings at the pumps every week. But some areas are indeed impacted in a negative way.There are a variety of hypotheses as to why oil prices declined, including an increase in supply accounting for 60 percent of the plunge, lower than expected demand and the appreciation of the dollar. In 2014, world oil production grew at a faster pace than demand and the falling oil prices will negatively affect oil exporting countries like Russia, Saudi Arabia and Venezuela, whereas importing oil countries like China, Japan and the U.S. will gain.Gas, diesel and heating oil consumption account for about 65 percent of total U.S. oil use and with the decline in oil prices, consumers can spend that money saved elsewhere, boosting the economy. It’s estimated that more than $700 will be saved per household this year as a result of lower gasoline prices and historically, a 50 percent oil price decline yields a 0.3 to 1 percent increase in U.S. GDP.Oil prices are predicted to gradually rise, but not to the $100 per barrel level anytime soon. The U.S. as a whole will benefit from low oil prices, but the benefits will be distributed unevenly among the states, as those with large shares of oil and gas will suffer. And in the interim, the majority of Nations Lending clients are benefiting from spending less at the pump.

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