13 January 2014

In addition to it, a weaker employment results can push fixed rates lower, as higher unemployment rate will keep labour costs under control. And, as you know, the cost of labour is the most important factor affecting inflation. Usually, if investors predict inflation increase in the future they demand higher bond yields in order to offset money devaluation. Meanwhile, if they expect lower inflation, the reverse scheme takes place.

Another important thing to understand is that withtoday’s low ratesthe main driver of the future housing pricesshould be rising incomes. And if we need to choose between increasing mortgage rates caused by higher incomes and a healthy housing market, or falling mortgage rates caused by decreasing incomes and a weak real estate market, we definitely know which scenario is better.

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