How to Plan to Keep Interest Rates Low Until 2023
Last week, the Federal Reserve shared its latest plans to boost the economy amid the coronavirus pandemic. After a two-day policy meeting, forecasts show the Fed is aiming to keep interest rates near zero until at least 2021, and some officials said rates could remain low until 2023. These minimum interest rates can have various financial implications for you personally. , depending on your goals. Here are some things to consider when planning a low interest rate environment over the next few years.
Buying a home or refinancing can be cheaper
According to The Wall Street Journal , experts say the Fed’s decision could mean it will continue to be cheaper to buy a house or refinance a mortgage . Of course, the lowest mortgage interest rates are not available to all borrowers. Even though you can hit the best bets, you shouldn’t make such an important decision based on interest alone. Consider how the costs compare to your other goals — for example, investing for retirement, paying off your debt, or getting your kids through college. If you can comfortably afford your mortgage payments and repairs and maintenance , the next few years could be a good opportunity to buy a home. But if the costs and expenses are pushing your budget too far, renting may be your best bet. However, those planning to refinance their mortgages may want to act soon: From December 1, Fannie Mae and Freddie Mac will start picking up an additional 0.5% “ Bad Market Commission ” for most mortgage refinancing cases.
Savings Rates Will Remain Low
Unfortunately, the latest news can be difficult for contributors. Ken Thumin of DepositAccounts notes that there could be a prolonged period of very low interest rates – and that could be worse than what we saw in 2008-2015.
He predicts that we may see a few rare 2% CD offerings in 2021 and 2022, so anchoring at 1% CD may not be the best solution. Instead, you might be better off saving your money in high-interest savings, or trying the long-term CD ladder that offers staggered maturities. There are a few other checking accounts offering at least 2% rewards , but there is also a downside that is worth paying attention to. For example, there may be additional hurdles to jump over to secure these rates, along with balance sheet restrictions and interest rate cuts.
Student Loan Refinancing Opportunities
While most federal student loans are currently on hold until December 31st, it might be tempting to take advantage of future refinancing offers. But first, think about what you can refuse if you repay the federal loan with a private one. Federal student loans offer a number of benefits including flexible repayment plans, student loan forgiveness, deferral, and refinancing. But if you already have high interest private loans, refinancing may be an easier solution.