We hear opinions about interest rates, trends, and their impact. Still, few people understand the significance, importance, and relevance of interest rates in many aspects of our lives. They have been involved in political campaigns, leadership, leadership training and planning, real estate and financial sales, and advice. I firmly believe it is helpful to understand and know more about them and how they affect so many things in our lives. Interest rates are essential, whether personal, organizational, public finances and spending, homeownership, related costs, credit issues, business issues, stock and bond prices. This paper will attempt to briefly consider, review, and reflect on five areas.
1. bond prices and interest rates: in general, bond prices are inversely proportional to interest rates! When interest rates fall, prices rise, and vice versa when they grow! Bonds have a so-called nominal value, the price paid at the end of the term. This is generally set at 100 at maturity or $1,000 per issue in the market. However, the price goes up and down during the period, which can affect liquidity issues
2. mortgage interest rates: in recent years, interest rates have been historically low, which has contributed to a rise in the housing market as a whole and prices in particular! (*) In most parts of the country, house prices are at an all-time high, and the difference is enormous and dramatic! When this rate is low, homebuyers can buy more houses for their dollar because their monthly payments are low! But what would be the impact of a rise in this rate? 3. consumer credit: the cost of borrowing
3. consumer credit: low borrowing costs, consumer credit, etc., help the car industry! Although not as common as other vehicles, interest rates on credit card loans are low, and there are often short-term promotions! However, as many of these are variable, based on indices, etc., what would happen to this if it increased?
4. business loans: Another area of concern is the cost of business loans. They have access to relatively inexpensive funds, helping to reduce the cost of borrowing, global operations, share purchases, etc. But what happens if this works?
5. the impact on share prices: There was a time when it was thought that the stock market was the only place to play because bonds offered little in the way of dividends and other benefits. In addition, many companies were thought to be in better shape than they were and saw higher price-to-earnings ratios than in the past! How long will it work? How high can they go?
Many factors influence these questions, including actual and perceived inflation, consumer confidence, government policy/action/Federal Reserve, etc. We hope that the more you know and understand, the better prepared you will be.