Interest Rates Are Important in 5 Areas!

Interest Rates Are Important in 5 Areas! """Despite the fact that we hear a lot of opinions about interest rates, their trends, and their impacts, very few people seem to understand the significance, and importance/ relevance, of these rates in several areas of our lives! After many decades of involvement in political campaigns, leadership, leadership training/planning, real estate, financial sales and consulting, and so on, I am convinced that one benefits from learning more about these topics and how they affect so many aspects of our lives! Interest rates truly, significantly matter in personal, organizational, and/or public finance/spending, home ownership and related costs, credit - related issues, business matters, stock and bond pricing, and so on. With that in mind, this article will attempt to consider, examine, review, and discuss five of these areas, as well as how the cost of money makes a significant difference.

1. Bond prices and interest rates: In general, the price of a bond is inversely related to interest rates! Prices rise when interest rates fall, and vice versa when interest rates rise! Bonds have a par - value, which is the price that is paid at the end of the term. At maturity, markets typically set these at 100, which represents $1,000 per bond. However, pricing can rise or fall during the period, affecting liquidity-related issues!

2. Mortgage rates: In recent years, we have seen and experienced record-low mortgage interest rates, which have aided the overall real estate/housing market, particularly in terms of pricing increases! In most areas of the country, home prices are at their highest levels ever, by a significant and dramatic amount! When this rate is low, a home buyer can get more house for his money because his monthly payments are so low! Consider, however, what the potential ramifications and impacts may be when these rates inevitably rise.

3. Consumer credit: Low borrowing costs help the automobile industry, in terms of consumer financing, and so on! Although not as much as other vehicles, credit card debt has lower interest rates, and there are frequently short-term promotions offering deals! However, because the majority of these are variable and based on some index, etc., what happens when this increases?

4. Business borrowing: Another area impacted is the cost of business borrowing! They now have access to relatively cheap money, which helps to reduce the costs of borrowing, overall operations, purchasing inventory, and so on. But what happens when this starts ticking?

5. Effects on stock market prices: For a long time, because bonds paid so little in terms of dividends and so on, many people thought the stock market was the only game in town! Furthermore, many corporations appear to be doing better than they are, and we have seen a higher price-to-profit ratio than in the past! How long can this go on? How far can it go?

Many factors influence these issues, particularly actual and perceived inflation, consumer confidence, politics/government actions/the Federal Reserve, and so on. The more you learn and comprehend, the better prepared you will be!"""