A Silver Lining Amid Dark Economic Clouds
ROBERT SIEGEL, host:
SIEGEL: From NPR News, this is All Things Considered. I'm Robert Siegel. So far, economically speaking, it's been a pretty bleak winter. The major stock market indexes are down 30 to 40 percent for the year and this could turn out to be the worst recession since World War II. But there are a couple of bright spots. Gas is now a lot cheaper, and we are seeing some of the lowest interest rates for home loans in decades. NPR's Chris Arnold has this look ahead.
CHRIS ARNOLD: At Stan Hatoff's discount gas station in Boston, cars are backed up three-deep to fill up their tanks for $1.59. And that price is putting some people here in a good holiday mood.
Ms. JESSIE EFFE (Retired City Bus Driver): Yeah, so every time I see gas, I've got this thing. I got to run in there and get me some gas.
Unidentified Man: Yeah, I mean - this is like you pull in, it kind of makes you happy to pull in to a gas station.
Ms. EFFE: Yeah, and you know, in my way in - because - look at the price, $1.59.
ARNOLD: Jessie Effe is a retired city bus driver, and she says it was tough when gas was four bucks a gallon.
(Soundbite of interview)
ARNOLD: How much was it costing you to fill up the Ford Explorer here, now?
Ms. JESSIE EFFE: Oh, that was ridiculous. Forty bucks wouldn't even give me a half a tank. So, you figure that out.
(Soundbite of laughter)
Unidentified Man: You weren't filling it all the way up?
Ms. EFFE: No, no, I wasn't. I put 40 in, it wouldn't even last a week, a couple of days. I mean, really, for this truck, I would never advise anybody to buy this truck.
ARNOLD: Effe says she bought some extra Christmas presents this year with the money she saved on gas. She got her son a nice pair of Timberland boots - hope he's not listening. Cheaper gas, of course, is a huge help to people with modest incomes and long commutes. Over at the next pump, Paul McNamara is fueling up his small red pick-up truck. He's a building maintenance man.
Mr. PAUL MCNAMARA (Building Maintenance): I was burning 20 bucks a day getting back and forth at $4 a gallon, you know. I drive a hundred miles a day. But yeah, this has helped a tremendous amount. I'm just hoping it stays this way.
ARNOLD: Saving up with a $200 a month is a pretty nice present for people like McNamara, but he didn't splurge on Christmas this year. He was out of work for a while, and he's got loans from putting a kid through college.
Mr. MCNAMARA: I'm still trying to recover from spending so much, $4 a gallon for so many months. It's only been low a couple of months now. So I'm still trying to get things to swing around the other way. Right now, I'm working 60 hours a week trying to make ends meet.
ARNOLD: And that's a big question for the economy, whether it's cheap gas or tax breaks and stimulus checks from the government. Will people actually spend the extra money or just pay down their debt? This is what the British economist John Maynard Keynes called the paradox of thrift. It's good for individual people if they save money, but if too many people are worried about the recession and their jobs, and they keep cutting back on their spending, that'll make the recession a lot worse for everybody. That's why the government is pulling out all the stops to put money in peoples' pockets. One thing that could really help, lower home mortgage rates.
Mr. PAUL VAN WART (Branch Manager, Allied Home Mortgage, Westwood, Massachusetts): Definitely. I mean, it's a crazy market right now, working every night till midnight, it seems, and starting at 6 AM the next day.
ARNOLD: Paul Van Wart is the branch manager of Allied Home Mortgage in Westwood, Massachusetts.
Mr. VAN WART: On average, we're saving people anywhere from $150 to $200 a month. Yeah, and we do have some people that saved as much as $500 to $600 a month. I mean, it's amazing.
ARNOLD: In recent weeks, the Federal Reserve has moved to push home mortgage rates lower by announcing a plan to buy out mortgage-backed securities, and it's worked. Thirty-year fixed rate loans are as low as they've been in 40 years.
Mr. VAN WART: It just jump started the mortgage market again, and you know, right now, rates seem to have leveled off. They've actually crept up a bit, and I think that's due to the amount of volume. One of the banks that we deal with said they originated over a billion dollars in loans in the last 45 days.
ARNOLD: Van Wart says when lenders get overwhelmed, though, sometimes they'll raise rates a bit just to keep customers at bay while they catch up, but rates are still very low. So, a lot of people are ducking out of holiday parties to spend some time on the phone with their mortgage brokers. Right now, that can be like getting a call from Santa Claus. Chris Arnold, NPR News Boston.
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