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How A Rising Unemployment Rate Can Help Mortgage Rates Fall


Unemployment Rate June 2009Last week’s jobs report is the latest data point to drag down rates for today’s home buyers and would-be refinancers.

As reported by the government, the national Unemployment Rate rose to 9.5 percent in June — a 25-year high.

As the percentage of out-of-work Americans grows, households have less disposable income to pump back into the economy.

And so, because consumer spending accounts for two-third of the economy, the growing ranks of the unemployed are forcing markets to change expectations about when the U.S. economy will reach its full recovery.

Inflation is the enemy of mortgage rates. The perceived absence of inflation, therefore, can be its friend.

With fewer working Americans, we can expect slower economic growth plus a smaller probability for inflation over the medium-term. This is why mortgage rates are lower of late, off by as much as a half-percent from the peak.

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