This is part two of Capital Growths’ mini blog series exploring the current state of the American financial market, what it means for your financial health and how you can keep your finances afloat during the COVID-19 pandemic.
In mid-march, the Federal Reserve and the Bank of Canada slashed their interest rates.
Why did this happen?
Interest rates go down when Central banks lower ‘target rates’ to stimulate the economy, or in this case, to help support economic recovery from a global pandemic. It may take a while to see the benefits, but so long as people and businesses have access to cheap capital, it helps them combat the consequences of a slowing (or closed) economy.
This means interest rates from your credit cards, loans, and savings accounts will drop. This also means mortgage rates go down. So, if you currently have a long-term, fixed-rate mortgage, with an interest rate above 5%, it may make sense to refinance given how radically rates have been cut.
While 0% interest rates may help borrowers through lower mortgage rates, auto loans and consumer loans, the risk to those saving for retirement is the decline in dividends, yield, and interest needed to supplement their retirement.
When interest rates are low, it’s not as attractive to keep money in a savings account, which encourages people to invest in other things, like the stock market.
Schedule a free consultation with our team to discuss how you can best leverage your assets amidst these uncertain times.
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