The article, "Stable Home Prices, Low Mortgage Rates Could Gas Economy", suggests the possibility that stronger home prices and further reductions in interest rates, could be what is needed to push the economy in the right direction.
The author, Stephanie Armour, presents the facts that 30 year loan rates are at 4.17%. Median home prices in the 3rd quarter were up in 50% in metro areas whereas last year they were only up in 20 of the same metro areas. Also, the Fed says that it will be putting 600 billion into long term treasuries by June 30th of 2011. Since May of this year, 30 yr. rates have been below 5% and improvements in home prices have been made even though home purchases fell after the Fed canceled the home buyer tax cuts.
The drop in long-term mortgage rates will entice many more people to refinance drop the cost of their mortgage. This could increase discretionary income and therefore further spending by the population on the whole. This could help jumpstart the economy or at minimum give it a boost.
The biggest problem getting the boost to the economy that is needed is that many in the position to need refinancing have poor credit or little equity. These factors will limit the ability of some to qualify to refinance. I feel that the lower rates do and will entice people to refinance. Refinancing will give people more cash to spend getting caught up and possibly ahead in their finances. Looking at the whole situation from a realist point of view, I'm not confident that there will be enough qualifying individuals to achieve the level of refinances necessary to have a large enough impact. Therefore, the effect will not be enough fuel to get this economy rolling.