How Does Interest Rates Work?


All right. How do rates work? And why do they keep going up? And don’t worry, I got some good news.

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Yes, rates are going up, but it’s still the cheapest money in decades. I mean, can you believe that in the 80s rates were all the way up to 18%. So, anything right now is still cheap money for you to borrow, make a move. Now, it’s not at 3% like it was two, three years ago when we were in recovery mode, but now the economy is strong and that’s what affects interest rates.

So, essentially in plain English, so you guys can understand, when unemployment rate is low, which right now it’s at a record low, and there’s high confidence in the economy, people are dumping money in the stock market, they’re going for bigger returns on investment, rates go high. When the economy is suffering, and unemployment is high, and people don’t have the confidence in the economy, people take their money out of the market, and they put it into something conservative, which is called mortgage back securities, because people pay their mortgages, it’s a safer investment, and that causes rates to go low.

So, pick your poison, high unemployment, bad economy or higher rates, strong economy, right?