Interest rates dropping again?

[frugal saver]

This morning I pulled out an Interest Rate Tracker and quickly visited the web sites of all the banks/credit unions that I keep an eye on.

I quickly saw that while the 1-year, 2-year and 3-year CD rates were the same, on almost all the banks the 4-year and 5-year rates have dropped in the last several months.

I would think if the bank thought the Fed rate was going up, they'd be happy to trap you into a lower rate.

Any opinions on why they're lowering rates?

[TexasHusker]

Rates may reach zero. In fact, the Federal Reserve has hinted that NEGATIVE interest rates (the overnight rate) may be an option in the next recession. That's because all of the stimulus and quantitative easing from the last recession basically just kicked the consequences down the road from loose lending and runaway deficit spending. Even with super low interest rates currently, the economy is showing signs of foundering. That's a problem.

The next recession, which is imminent, we won't have any way to further kick the problem down the road, so it will likely be the most protracted recession since the Depression, and may even eclipse it in duration.

The Federal Reserve is facing a nightmare - trying to further prop up an economy but with few bullets left in the holster. Scary stuff.

[clatoden99]

30-year mortgages, are tied to longer term interest rates, which typical rise when the economy is expected to do better. So if the Fed ends up raising interest rates without sending us into a recession, then borrowing costs for houses and autos could go up too, and that will cost consumers. But hopefully the extra cost will be a small price to pay for a better economy.

Variable rate home loans usually adjust once a year. If the Fed raises rates two or three times before your next loan adjustment, then “you could see a noticeable interest rate increase” on your house payments.

[feh]

This morning I pulled out an Interest Rate Tracker and quickly visited the web sites of all the banks/credit unions that I keep an eye on.

I quickly saw that while the 1-year, 2-year and 3-year CD rates were the same, on almost all the banks the 4-year and 5-year rates have dropped in the last several months.

I would think if the bank thought the Fed rate was going up, they'd be happy to trap you into a lower rate.

Any opinions on why they're lowering rates?

It's pretty simple - the expectation for what interest rates will be 3-5 years from now has dropped over the last few months.

[LivingAlmostLarge]

The negative interest rates have happened already in other countries. It was weird that last years rate raise caused a mortgage drop. Not a good thing so I've been told. Even a friend who does mortgages says it's a very strange environment for mortgages. He's been in it 22 years and said he's never seen this sort of mortgage environment.

[TexasHusker]

The negative interest rates have happened already in other countries. It was weird that last years rate raise caused a mortgage drop. Not a good thing so I've been told. Even a friend who does mortgages says it's a very strange environment for mortgages. He's been in it 22 years and said he's never seen this sort of mortgage environment.

Starting 2008, Uncle Sam started taking on tremendous debt to prime the economic pump and drive down borrowing costs. Of course, that debt has to be repaid. And as is always the case, an expanding economy must someday contract. That is beginning to happen now. Home and car sales are slowing, even in the midst of ridiculously low interest rates.

There is nothing left in the tank for Uncle Same to prime the thing again, and we still have all of that debt to repay from the Great Recession.

[JBinKC]

It hasn't taken very long (2 weeks) but rates have reverted back to their normal range. All it takes is a Federal Reserve Governor talking up rate increases.