How long can interest rates stay low?

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How long can interest rates stay this low?

Many customers come to me with the belief that next year interest rates will be better. Or after the upcoming election interest rates will rise. But Ben Bernanke, Chairman of the Federal Reserve Board, has made it very clear he has no intent of raising interest rates until mid 2015.

Inerest Rates

Japan’s Treasury Rates

I do understand why so many think rates will rise, it is because they have never seen rates so low. Most have never experienced a long period of economic trouble. To stimulate the economy the government will lower interest rates during periods of trouble. Let’s look at Japan for an example in the early 1990 they had a real-estate bubble burst and their government responded with lowering their interest rates. However the growth cycle has been slow and for 15 years the interest rates on Japan’s 10 year government bonds has stayed below 2.0%. In fact on October 7, 1997 the 10 year rate dropped to 1.99% and now 15 years later the rate as of October 17, 2012 it is only .775%

Liquidity has a price, lower interest rates, and fearing a long term commitment is natural. But when in the economic cycle we are experiencing a multiple year rate might be wise. If you can find a good rate and lock it in for a few years this would be the ideal solution during these tuff times. Three years or five years go by very quickly and the higher rates that are offered will give you much more interest in the long run. If you work with a CD Locator like the ones here at Old Harbor Financial you can shop the rates of multiple institutions at one time. Then work side by side with a professional who will help you decide which investment is the best fit for you and your needs. Call today to talk with one of our associates and find out the answers to you questions.

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