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What could happen to interest rates with another dip?

A television screen on the floor of the

A television screen on the floor of the New York Stock Exchange shows the Federal Reserve interest rate decision, Tuesday, Aug. 10, 2010. The Fed, citing "subdued" inflation, said it would keep its target for a key interest rate at zero to 0.25 percent for a "extended period."(AP Photo/Richard Drew) Credit: AP

Q: If there's another drop in real estate real estate prices, would that mean that interest rates will go up?

A: Interest rates tend to go down during recessionary times as the Federal Reserve lowers its federal funds rate in an attempt to stimulate economic growth. And as the demand for homes lessens and prices drop, there can be a downward pressure on interest rates.

By the time the housing market recovers, mortgage interest rates, as well as interest rates for home equity lines of credit, will likely lift off of 60-year lows and we will see inflation, to some degree, return in one way or another.

In short, a stronger housing market will often mean higher interest rates.


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