Source: Dr. Mike Walden, NCSU COLLEGE OF AG & LIFE SCIENCES, 10/6/11

 

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Interest rates are as low as they have been in many decades. But is that good or bad? N.C. State University economist Mike Walden weighs in.

“Well … as in all of economics, you usually have pluses or minuses. … Clearly low interest rates are not good for people who are saving money. So, if someone’s trying to save money — for example, in a CD or some kind of short-term, safe investment — they’re finding they’re getting very low interest rates, maybe 1 percent. Maybe 1.5 percent. In order to get higher rates, they are going to have to take … more risks.

“On the other hand, as we are famous to say, low interest rates are clearly good for borrowers. So for example, if you want to buy a home and you can qualify and you can get a bank to loan you money, this is a great time to take out a mortgage because you’re looking at something like … a 4 percent interest rate. Refinancing homes is very attractive now. If you have a mortgage rate that’s 5 or 6 percent or more and you plan to stay in your house for a number of years, you want to try to refinance that rate down to those nice low 4 percent rates right now.

“So, yes we haven’t seen interest rates this low in a very, very long time. And it does create opportunities, especially those opportunities for people who want to borrow money.”