What Do the 0 Percent Interest Rates Mean?

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.

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. The Standard & Poor’s 500 (S&P 500®) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are not available for direct investment. The performance of the index excludes any taxes, fees and expenses.

Registered principal offering securities and advisory services through Independent Financial Group LLC (IFG), a registered broker-dealer and investment adviser. Member FINRA & SIPC. Advisory Services through Capital Growth, Inc. (CGI). CGI and IFG are not affiliated.

Want more Capital Insights?

Skip to content