Economic data released this week had little effect on mortgage rates although there were two actions that heavily influenced the lowering of rates. One of these actions was the announcement that China will take steps to slow it’s economic growth. China released a report showing that its Gross Domestic Product (GDP) grew at a pace of 8.7% in 2009. Rapid growth generally leads to higher inflation. In a effort to slow its economy and prevent inflation, China announced it’s going to curb bank lending. Being the worlds third largest economy it is responsible for a significant percentage of global economic growth so the effects of a slowdown in China will be felt around the world. The second action taken was President Obama’s proposed new restrictions on the financial institutions. Those restrictions propose a limit to the size and activities of large banks to reduce the risks to financial systems as a whole. If passed by Congress, this too would lead to slower growth for many large US financial services firms. The potential for slower economic growth and the resulting reduction in inflationary pressures was favorable for mortgage rates.
