Negative Interest Rates - A Possibility Here?

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Real Estate Technology

There's been considerable national publicity recently about negative interest rates.

These have already been implemented by some European central banks and now Japan has followed in their footsteps.

Although the idea sounds bizarre and counterintuitive at a glance, the basic theory is that by charging a small percentage to depositors and paying bank customers who borrow, there will be far better incentives for businesses and individual consumers to borrow more money, hence stimulating the depressed economies in areas of the world such as Europe where there has never been a full recovery after the years of recession and where there are real risks of price deflation.

This is a venture into uncharted waters in the financial world and, perhaps needless to say, there are some serious risks attached to the process, including the possibility that these measures may only achieve the exact opposite of what they are intended to create.

So could it happen here too? The Federal Reserve has certainly not discounted the possibility, were the US economy to show signs of significant deterioration.

Obviously, although it's hard to know how they might be exactly affected, there are potential implications for mortgages here. Last year an online CNN Money articleconsidered the possibility of being paid by the bank for having a mortgage.  

The obvious next question is how this might affect mortgage interest rates themselves, but it's important to remember that these are most closely related to demand for bonds, so there may not be as direct a correlation to negative interest rates at banks as one might initially imagine (or perhaps we should say 'hope').

In terms of the possibilities of all this happening here, perhaps we should pause to consider the robust and confident comments that President Obama made in the Roosevelt Room of The White House last week, concerning the health of the economy and growth in jobs. It's encouraging to report that, in many ways, America is simply doing better right now than many other countries. Evidence of this can be seen in the recent strength of the US dollar against other major currencies.

So while it's always a good idea to keep pace with all financial developments, as ever home buyers and property investors would do best to judge the situation that is in front of them, with mortgage rates at near historic lows. Indeed, with the economy doing so well, rates showed the first rise for many, many weeks last week so, who knows, they could finally be heading in an upwards direction again. But, in such a volatile world, who can be certain!

The most important thing to say is that there has rarely, if ever, been a better time to invest in property, whether you're looking for a residence or building up a passive income portfolio.

Contact us today for an informed and up to the minute analysis of the great current real estate opportunities in the Albuquerque area.

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