Fixed Rates

Fixed Rates

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 1.5% while the stock market is earning double digits.