Unemployment Numbers: Effect On Mortgage Interest Rates
As a mortgage broker in Toronto, it’s important for me to keep on top of significant economic data. This data is useful to me as it helps me to advise my clients on decisions about interest rates and predicting opportunities and pitfalls in regards to their mortgage financing and real estate options.
The Globe & Mail reports an increase in the unemployment rate in their article “Jobless Rate Inches Up To 8.6%”. The article suggests that while the unemployment rate increase to 8.6% from 8.4% in May, the numbers are better than expected.
The Globe site hosts two interactive maps which break up the unemployment numbers by region, province, and city.
Map 1
Map 2
While unemployment numbers may not have a direct impact on real estate, from a practical “coffee table” economist point of view it should be telling you something. Currently, the real estate numbers (especially in Toronto) are very positive and it seems like real estate hasn’t really been affected by the global recession. However, it would be a mistake to believe we are invincible. With unemployment on the rise there lies the risk for the following:
1. Increase in bankruptcies,
2. Increase in power of sales on homeowners who can’t pay their mortgage anymore, and
3. Decreased real estate values as fewer and fewer consumers will have the appetite or ability to purchase and afford a home.
One positive is that with fewer consumer dollars circulating we may experience deflation which would mean interest rates will stay low.
