If you follow what's happening in the economy and you're not an economist you're in good company. Knowing economic basics and understanding how they impact our daily lives is a part of being a good financial steward of your money. Because mortgages are my business, I've put together a basic explanation at how the employment rate influences mortgage rates.
Here's a quote from today's Financial Post, "Statistics Canada said Friday (today) that employment rose by almost 40,000 in
December, pushing the jobless rate down 0.1 percentage points to 7.1% —
the lowest level since December 2008 when the rate was 6.8%."
How does the employment rate impact mortgage rates?
- the lower the unemployment rate the more people have jobs and work
- with a more competative job market, employers normally need to increase wages to attract desirable employees
- increases in wages means the cost of production and goods goes up, because employers build the cost of wages into production
- higher prices in production mean that prices go up. Companies transfer that cost of production to consumers through the price.
- if prices go up, than inflation can go up too!
- when inflation is expected to go up, it impacts the bond market (which kind-of reacts to what the forecast for inflation will be in the future)
- when the bond yield goes up, fixed mortgage rates go up!
Below is also an interesting link to the Financial Post article that quotes several leading economists and what they're saying about job growth and inflation. If you click on the link and read the comments, you'll see the polarized views on what the employment figures mean to the Canadian economy.
http://business.financialpost.com/2013/01/04/canada-job-surge-what-the-economists-say/
If you'd like advice about your own mortgage please call or e-mail me. My number is 519-763-3900 ext. 1001 or e-mail at lastovic.s@mortgagecentre.com
No comments:
Post a Comment