Good Interest Rates
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Good interest rates are rates that are favorable to the customer. For a borrower, good interest rates mean low interest rates that he can afford, while for a saver or an investor, high interest rates are good. There are several factors that determine whether a particular level of interest is good or bad.[br]
Good Interest Rates: Driven by Several Factors
Interest rates are good or bad depending on several complex factors, including the customer’s financial position, the overall economic situation and the instrument to which they are related. High interest rates are good for savers and investors, while putting greater pressure on borrowers. Similarly, low interest rates are not always good since they may carry some hidden conditions or costs that are too harsh for the borrower. Good interest rates are rates that suit the customer’s requirements and fulfill his needs without putting too much pressure on him.
Interest rate changes are introduced by the central bank of a country, keeping in mind the overall economic situation, the inflationary pressures and several other factors. These changes are introduced via the monetary policy and aim to bring about the desired impact on the country’s economic growth. Interest rates are the key factors driving growth in an economy. They not only impact the consumption and spending levels but also the stock and foreign exchange markets.
In times of recession, when economic activity is low and the growth is restricted or negative, the central banks prefer to follow a low interest rate regime. Low interest rates aim to encourage borrowing and investment in new ventures and thus are considered good interest rates Not only this, low interest rates encourage individuals to borrow and purchase big ticket items, which in turn spurs demand and production levels. However, the low interest rates may discourage savings to some extent.[br]
Good Interest Rates and Types of Instruments
Interest rates on loans of any kind are good or favorable to the customer if they are low and affordable. Housing, mortgage, education, auto or credit card loans are in great demand if the interest rates on them are low. Interest rates on saving instruments, such as savings accounts, certificates of deposit and money market funds, are considered good if they are high.
