How does the dismissal rate affect mortgage rates?
from regression analysis I found that there is a strong positive relationship between the unemployment rate and mortgage rates. I can't numeral out why. Any thoughts?
Answers:
Your result most likely stems from an omitted unstable. What other variables are you including in your regression. Have you tried lagged variables of laying-off?
Also what data are you using. If you are using data from days gone by 10 years following the 2001 recession unemployment starting declining. During equal time period the large emergency for US assets caused 10-year bond rates to fall to extremely low rates. In turn mortgage rates also fell. Again I'm wondering if you are missing a couple of knob variables.
I dont think in attendance is any direct cause and effect explanation for this correlation.
Rather, both of these factors are fragment of broader economic forces which are surely related, but not related just to respectively other.
In general, the economic is going through a slump right presently. That will force the unemployment rate to go up because employer are cutting jobs because they are not selling as much. Mortgage rates are going up because the bank and lenders are facing a liquidity crisis, and because the housing market is in a slump. For too long, lenders and borrowers alike assumed that housing prices would keep hold of going up, and this led to an abuse of credit. Now this comfortable access to credit is being curtailed, and mortgage rates are going up to compensate.
You need to be careful, mortgage rates are prospective rates and severance data is retrospective data. Data collected at time t may surrounded by fact reflect time t-1 and forward rates at time t+359. Further, the mortgage flea market has itself changed over time being deposit funded and insurance reserve funded twenty years ago and mutual fund owned today. That creates different owners near different liabilities.
Finally, time series regressions are very difficult to do correctly. It is an entire pasture in itself.
Unemployment is related to bond prices because higher severance levels tend to result in lower inflation, which make bonds safer and permits higher bond prices, so here should be a positive relationship with prices but a negative relation beside rates. However, a mortgage could be thought of as 360 forward obligations and the current unemployment smooth does not reflect future beliefs around the economy in a direct bearing.
If you find a positive correlation that is very strong, within is also a possibility that you have a unit root problem and your t-tests are misspecified. The significance could be spurious. It in some measure depends upon whether the relationship is stationary or not. If you are running your tests using an ordinary statistics bunch, it is likely your correlation method is invalid.
It does seem logical to me that higher dismissal rates would decrease mortgage rates. However, mortgage behavior is extremely complex, and rates are influenced by wany factors. Other factor could be moving to increase interest rates at the same time unemployment is moving to fall rates.
Related Questions:
Mortgage rate lock-in deposit?
I already paid $500 deposit for rate lock-in before. But immediately closing isn't done and my mortgage company asked abother deposit of over $500 for 15 -days extension. I am sure I can't close in next 15 days (i am not even slightly close to the closing process!)...
Answers:
Your result most likely stems from an omitted unstable. What other variables are you including in your regression. Have you tried lagged variables of laying-off?
Also what data are you using. If you are using data from days gone by 10 years following the 2001 recession unemployment starting declining. During equal time period the large emergency for US assets caused 10-year bond rates to fall to extremely low rates. In turn mortgage rates also fell. Again I'm wondering if you are missing a couple of knob variables.
I dont think in attendance is any direct cause and effect explanation for this correlation.
Rather, both of these factors are fragment of broader economic forces which are surely related, but not related just to respectively other.
In general, the economic is going through a slump right presently. That will force the unemployment rate to go up because employer are cutting jobs because they are not selling as much. Mortgage rates are going up because the bank and lenders are facing a liquidity crisis, and because the housing market is in a slump. For too long, lenders and borrowers alike assumed that housing prices would keep hold of going up, and this led to an abuse of credit. Now this comfortable access to credit is being curtailed, and mortgage rates are going up to compensate.
You need to be careful, mortgage rates are prospective rates and severance data is retrospective data. Data collected at time t may surrounded by fact reflect time t-1 and forward rates at time t+359. Further, the mortgage flea market has itself changed over time being deposit funded and insurance reserve funded twenty years ago and mutual fund owned today. That creates different owners near different liabilities.
Finally, time series regressions are very difficult to do correctly. It is an entire pasture in itself.
Unemployment is related to bond prices because higher severance levels tend to result in lower inflation, which make bonds safer and permits higher bond prices, so here should be a positive relationship with prices but a negative relation beside rates. However, a mortgage could be thought of as 360 forward obligations and the current unemployment smooth does not reflect future beliefs around the economy in a direct bearing.
If you find a positive correlation that is very strong, within is also a possibility that you have a unit root problem and your t-tests are misspecified. The significance could be spurious. It in some measure depends upon whether the relationship is stationary or not. If you are running your tests using an ordinary statistics bunch, it is likely your correlation method is invalid.
It does seem logical to me that higher dismissal rates would decrease mortgage rates. However, mortgage behavior is extremely complex, and rates are influenced by wany factors. Other factor could be moving to increase interest rates at the same time unemployment is moving to fall rates.
Related Questions:
Mortgage rate lock-in deposit?
I already paid $500 deposit for rate lock-in before. But immediately closing isn't done and my mortgage company asked abother deposit of over $500 for 15 -days extension. I am sure I can't close in next 15 days (i am not even slightly close to the closing process!)...