How Does Unemployment Affect Interest Rates? – A New Article From LoanLove.com Explains The Correlation

LoanLove.com helps home loan borrowers understand how the recent jobs report will affect rates with a new article.

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San Diego, CA (PRWEB) September 08, 2013

LoanLove.com is a borrower advice website that provides detailed insights into the mortgage industry in a fun and entertaining way. The team at LoanLove.com is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals and has the mission of helping consumers and borrowers to obtain the latest information on mortgage lending trends, the real estate market and the U.S. financial landscape in order to help them obtain a home loan that they will love. Those who have been following any real estate or financial news lately will likely have heard a lot of hype over the recently released jobs report and how it will affect the Federal Reserve’s plans to discontinue its bonds purchasing program. Many may wonder what these two separate things have to do with one another. To answer this question, Loan Love recently released a new article entitled “How Unemployment Affects Interest Rates (And Why)”

The article explains: “If you’re like most consumers, you’ve probably been taught that unemployment is a bad thing. A very bad thing. And in many ways, that’s true: Unemployment decreases sales of all types of products and consistently high levels of unemployment can place a real drag on the overall economy. And, of course, unemployment is especially bad for those who find themselves without a job. But, all that being said, there is one up side to a relatively high unemployment rate, at least for those who are lucky enough not to be part of that statistic: Because unemployment can result in a sluggish economy, the Federal Reserve Board often opts to lower interest rates or at least to maintain existing low interest rates to stimulate spending – and that can be a real benefit to those shopping for a mortgage.”

Loan Love relates that to understand how these two statistics (interest rates and unemployment) are correlated it is important to know that unemployment rates and interest rates are usually inversely related. This means that when unemployment is high the Fed often chooses to keep interest rates low, in hopes that his will encourage businesses to invest in furthering their business. The availability of low-interest loans acts as an incentive and expanding business will usually result in an increase in available jobs. The article says: “Similarly, lower interest rates often result in a higher rate of borrowing – and hence, spending – among consumers; that increase in demand can also cause businesses to hire more workers, again resulting in a lower unemployment rate. Conversely, when the unemployment rate is low, the Fed may move to increase interest rates to avoid inflation.”

Concerning the recent jobs report, the Loan Love article can help explain why so much importance has been put on the results of the data of the report. It says: “In previous statements, the Fed has said it will likely keep interest rates low until the unemployment rate hits 6.5 percent; however, that’s definitely not something that’s written in stone. The Fed meets eight times a year, and at any of those meetings the board may decide to increase interest rates with no warning. So what’s the lesson here? Never put off until tomorrow what you can do today. There’s no time like the present. Strike while the iron is hot (actually, that has to do with shoeing horses and not with interest rates, but you get the idea). In plain, 21st-century English: Interest rates are low now – they may be higher after the Fed’s next meeting.”

For more information, please visit LoanLove.com for the full article.


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