How to Make the Most of Low Interest Rates

At the moment many countries have low interest rates. This can be easier for some people than others and tends to have advantages and disadvantages for all. It is worth making the most of the situation though and knowing what you can do to keep your finances healthy.

If you have a mortgage then rates are likely to be very low. However, lenders will still differ in how much they charge and so it is always worth looking around to see whether you can get a good mortgage deal. You will find that there are fixed rate plans which will tie you in and offer security but they may not be the best. It is important to consider what you think may happen with regards to rates in the future, whether you think that they might go up or down and whether fixing will be good for you or not. It can be good to have the certainty of knowing how much you will pay each month, but it can be annoying if rates lower and you are fixed in.

If you have savings then it can be very difficult to know how to make the most of them when interest rates are so low. However, it is really the same whether rates are low or high. If you are prepared to tie the money up by putting it in a fixed term account or a notice account, you will be able to get higher interest on it. However, things are a little odd at the moment with some current accounts offering higher interest than savings accounts. They do tend to have strict terms which have to be met for them to pay the interest with regards to the amount of direct debits you need to set up and how much you pay in each month and the interest tends to only be paid on the first few thousand in the account with nothing for amounts higher than that.

Investing can earn more money than saving but it is risky and there are no guarantees. If you have money that you can afford to lose and want to take a risk to try to get more return then it can be worth considering as long as you are prepared to tie up the money for a long time, probably a minimum of five years.

If you want to borrow money for something, then a time of low interest rates can seem to be a good time to do it. It is cheaper to get a loan and therefore it is tempting to do so. However, in a time of low interest rates it tends to mean that the economy is shrinking and this means that employment is not so secure and so it is wise to think very carefully about this decision. Consider whether the thing that you are borrowing for is really worth paying the extra money for and also consider whether you will be able to manage the repayments if the interest rate goes up.

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Rachel Henderson is a professional freelance writer from the UK. She writes on many subjects but specialises in personal finance. As well as contributing to various blogs and websites she has her own website tracking her own money making process http://www.turnonepoundintoonemillion.com and sells her books through http://www.bowbridgepublishing.com.

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