Retail motor gasoline prices and the interest rate on mortgage loans

Abstract

A significant negative relationship exists between the price of retail motor gasoline and the interest rate on mortgage loans. Prospective homeowners avoid purchasing a mortgage‐financed home in areas where gasoline prices are rising to avoid endangering their future mortgage payments due to the greater cost of motor fuel consumption. The passage of government regulations and incentives aimed at increasing either the demand for or supply of alternative fuels, lowering the cost for gasoline customers to switch to alternative fuels, lessens the negative impact of gasoline prices on the cost of mortgage credit. Public transit mitigates the negative gasoline price impact.