Interest rates are crazy low. What’s that mean for me?
What interest rates?
Short-term rates: Controlled by the Federal Reserve to stimulate or slow the economy.
Long-term rates: Everyone’s usually talking about long-term US Treasury bond rates – market-driven and seen as the risk-free baseline rate for everything else. Add on borrower-specific risk, increase rate, get your mortgage loan rate.
Which moved? Both
Short-term rates: The Fed just slashed rates to support the economy. Think business credit card interest just went to 1%. Spending time, right?
Long-term rates: The 10-year US Treasury just hit all-time lows, meaning people are scared and want safe investments like US government bonds that will def pay them back.
What’s that mean for me?
Lower interest rates are great for borrowers. See if you should refinance your mortgage.
Low rates make stock returns a lot higher than bond returns, if you can handle the risk.
Aren’t you scared? Keep a long-term mindset
No one knows how bad this will get or for how long, but most people think stocks should grow more over 10 years than the 0.7% a US Treasury is paying you.