Worried about falling interest rates? Here’s what to do
Interest rates are an important indicator of economic activity. They have a direct effect on people’s consumption and hence can impact the everyday life of the general public. Interest rate cuts impact borrowers positively but the savers, investors and lenders are negatively impacted.
Falling interest rates make borrowing more affordable - in other words, loans or the cost of funds become cheaper. This leads to an increase in people availing home loans, auto loans among other loans to fund small or large credit-based purchases such as homes and cars.
Such purchases lead to demand which in turn helps the overall economy. Inversely, rising interest rates dampen consumption due to the higher cost of borrowing. Savers benefit from such scenarios as they get more attractive interests on their savings and deposits.
Let’s take a deeper look at the current trend of falling interest rates, analyze its impact on savings and investments…