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The Effect of the Job Market on Mortgage Rates |
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Written by Mabelle
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Tuesday, 18 July 2006 |
Of the numerous economic reports that are released each month-Consumer Price Index, Producer Price Index, Durable Goods, Housing Starts, etc.-the one that can affect the housing market the most is the Employment Report.
If the unemployment rate goes up, the Fed reacts by lowering short-term rates to stimulate the economy. When more jobs are being created, the Fed raises short-term rates to control the rate of economic growth. Right now, the unemployment rate is at 4.6 percent. To date, the Fed has raised short-term interest rates 17 times since mid-2004 and they will meet again in August.
Also, since short-term interest rates and mortgages, such as adjustable rate mortgages (ARMs) and home equity loans, are closely tied, when the Fed raises or lowers short-term interest rates, rates for ARMs and home equity loans do the same. When rates change, homeowners' monthly mortgage payments also change-the higher the rate, the higher the payment.
Those whose rates and payments have increased should still think about refinancing to fixed rate mortgages.
By M. Sese
http://realestatepress.org
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