It’s the Economy Stupid
As a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. But what does it all mean Basil?
Two examples of economic indicators which affect home interest rates would be The Job Report, which contains data on the number of jobs created or lost. It also contains data displaying the change in average hourly earnings of our economy’s workers. The second report would by The Retail Sales analysis.
This indicator tells us if we, as Americans, are spending our hard earned dollar. A strong job report means that Jobs had been created and the American Worker is making more money at his or her job.
At the same time, if the Retail Sales Analysis discovered that American are spending the dollars they earn, then it would be considered “Good” economic news. If that were the case and all other factors remained constant, Home Loan rates would increase. The increase would be needed to prevent inflation and slow the flurry of activity in the market.
Conversely, a weak Job Report and Retail Sales Analysis would show that No jobs had been created, or even worse some jobs were eliminated. At the same time if Americans were not spending the money they did earn, again all other factors remaining constant, the economy would need to stimulation.
Stimulation would come in the form of lower home interest rates. Low rates would mean you have more money in your pocket to spend and lower our overall cost of living and doing business would be lower.
If Companies have more money to spend, then they can hire more people which results in Jobs Being Created. If jobs are being created, people are happy, and happy people spend money in our economy. It’s a Vicious Cycle really.