7 things to know about low interest rates - MyFoxAustin.com | KTBC Fox 7 | News, Weather, Sports

7 things to know about low interest rates

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(WJBK) - Low interest rates will impact us all, regardless of your financial condition.

Kurt Fillmore, president of Wealth Trac Financial Group shares what you need to know about low interest rates.

They're good for borrowers, bad for savers.

Low rates mean it costs less to borrow money for things like homes, cars and education, but that also means less income from savings accounts, CDs and bonds. Even low inflation rates (around 2%) are much higher than current interest rates on savings accounts, so many savers are losing ground.
 
You need good credit to take advantage.

The positive side of low interest rates can be negated for those with poor credit, who generally must pay higher rates on loans. Example: For a $15,000 car loan (4-year term), jumping from 4% to 6% interest means paying an extra $650 dollars--34% more in interest!
           
            Credit Score tips:
·           Long-term: Pay bills on time, every month
·           Short-term: Have "unused" credit on your cards
·           Know the difference between "good" debt (mortgages or auto loans) and "bad" debt (credit card balances or unsecured loans)
 
It's still a good time to get a mortgage.

While prices are rising in metro Detroit, it's still a good time to invest in a home if you meet more stringent requirements for the down payment and credit score. The average mortgage interest rate is just over 4% nationally (July 2014)--still very low by historical standards.
 
They could encourage more risky financial behavior.

With the Dow Jones hitting 22 record highs in the first half of the year, more people are taking the risk of investing in the market. This is especially dangerous for those nearing retirement because they can't find higher returns on guaranteed accounts. Know your limits and take on risk wisely.
 
They changes the retirement savings approach.

Lower savings returns over a longer period of time mean that traditionally "safe" investments like CDs and bonds are less appealing. On the other side, tax-friendly options like 401(k) and IRA accounts as well as alternatives like annuities can be more attractive.
 
They lead to higher stocks, but also drive bubbles.

Low interest rates have fueled the stock market's run over the past few years, but also can drive speculation. ?According to Fed Chair Janet Yellen, now is the time to be wary of "to-good-to-be-true" stocks and industries.
 
They're not likely to change any time soon.


While rates have inched up from all-time lows, they are still historically very near the bottom. The Federal Reserve is being very careful not to upset our current recovery, so interest rates will most likely stay low for the immediate future.



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