Fixed Rates
"Rising interest rates are like expanding waistlines--in
most cases, not your friend."
- Lorayne Fiorillo, author of
Financial Fitness in 45 Days
Fixed rates become more popular when interest rates rise.
That's because the lender or investment guarantees to pay
a fixed rate of interest for a specified period of time regardless
of whether interest rates continue to rise or drop down again.
It's a great idea to lock-in to a fixed rate when interest
rates are on the rise. For example, with a fixed-rate
mortgage, you don't have to worry about rates inflating your
monthly payments so much that you can't sustain them.
On the other hand, you don't want to get stuck in a fixed-rate
investment account if interest rates decline substantially.
Lower rates spur economic growth, which leads to rising stock
prices. The last thing you want to do is tie up your money
in a money market account yielding 3% while the stock market
is earning double digits.
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