Insights from Our CEO - Interest Rates

  • by itradmin - Tue, 03/28/2017 - 08:16

Interest rates are still low. They are low in nominal terms (not adjusted for inflation), and they are even more attractive in real dollar terms (adjusting for inflation). The nominal interest rate is 4.15%. The inflation adjusted fixed 30-year mortgage rate is 1.43% (through February). Most folks live in the nominal world, but economists tend toward inflation adjusted numbers. How can anyone not be excited about a real mortgage rate of 1.43%? The real mortgage rate has not been this low since October 2012, when it lasted below 2.0% for just one month. The average real rate for the last 10 years is 2.78%. What we have going for us today is roughly half the 10-year average. Combine that with the business cycle rise in the economy, and there is a compelling incentive to borrow money to invest in your businesses. Tight labor is going to be a fact of life for the next decade. These low real interest rates make it possible for business owners/operators to invest in the technology or training required to balance our needs with the reality of short supply.