Let’s talk about something that makes exciting party talk that will cause people to cluster around you as if you are George Clooney. That’s when you expound about your knowledge of the appropriate level of interest rates, you soon notice that you are the only one left at the party.
There are many factors involved in interest rates but traditionally it is the level at which savers are willing to accept as a reasonable profit on the amount of money they have accumulated and that borrowers can afford to pay for cars and homes. Over a lifetime, younger people are borrowers but as time goes on, they begin to save money for their retirement years anticipating earning an appropriate rate.
For almost 15 years after speculating bankers almost blew up the world in 2008, savers earned almost nothing on their savings while borrowers paid nothing to borrow on their new houses, encouraging the statement “if you don’t have a McMansion, go get one”. Now that rates on mortgages have leveled out around 6.5% there is pressure from Washington on down to lower those mortgage rates to under 3% which means savers get nothing again.
