Interest rates are currently at some of the lowest levels seen in years. The government, acting through the Federal Reserve Board, has pledged to keep rates low to stimulate borrowing in a struggling economy.
Once the economy begins to rebound, interest rates will rise. If you have a solid credit history, there are some major purchases you can make now to take advantage of the low rates.
If you are thinking about buying a home or rental property, now is the time to do so. With mortgage interest rates less than five percent available, you’ll save significant money over the course of the loan.
For those who already own a home, consider your current mortgage. Depending on when you bought your home, your current interest rate may be anywhere from one percent to three percent higher than the rate you’d qualify for now. A mortgage refinance may save you money over the remaining length of your current loan.
As with home loans, car loan interest rates are at low levels. If you need a new car but have been putting off financing a new purchase, take a look at the available car loan options.
Although student loan rates are traditionally low, the rates have gone even lower due to the current economic conditions. If you have any student loans, you may be able to consolidate the loans and receive a lower interest rate through your student loan provider.
As with any good thing, there are some downsides to the current low interest rates. Other financial products have been affected by the dip in interest rates, but not in a positive way.
It may be hard to find the best Junior ISA in a low interest environment. Tax-free savings accounts are a solid investment for children but do suffer when rates drop. The best Junior ISA will offer you a good interest rate without too many fees.
Interest on other savings vehicles, such as savings accounts and CDs, also dip when rates are low. People who depend on interest-bearing accounts, such as retirees, may experience difficulty when the rate of return on these accounts isn’t what was expected.
Pensions are also affected by the interest rate drop. Since insurers may not have foreseen such low interest rates when designing the pension plans, some pensions may be under funded, leaving the employees, retirees and employer on the hook for the difference.
If you want to take advantage of low rates and earn returns on your savings, you’ll need to compare lenders, banks and credit offers before signing an agreement or depositing your money. Finding the best mortgage or the best Junior ISA will require legwork on your part.