One thing that affects anyone who has money and what you need to know

Posted on Sunday, September 15 2013

What is the one thing that monetarily affects everyone?

It is interest rate. Under the current banking system, central banks around the world manipulate the cost of money (interest rate) in their countries.
The US Central Bank (or the Federal Reserve Bank), however, is the single most influential central bank compared to anywhere else in the world. And their decision to keep interest rates low will have a major impact on every New Zealander, whether or not you invest in properties. This because the interest rates will majorly influence the consumer’s decision to save, invest, or borrow.

Part of the wholesale financing in New Zaland is from the US. And thus it’s important that you need to understand what’s going on in America, regardless of where you invest, or whether you invest at all.

The Federal Open Market Committee is a part of the Federal Reserve Bank that deals with Open Market Operations (OMO). One of their “jobs” is to intervene in the open market on the levels of interest rates. On April 25, 2012, they stated that they “decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions…are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

(Retrieved: www.FederalReserve.gov/newsevents/press/monetary/20120425a.htm)

Let’s look at some of the headlines from the US media in recent months.

“Mortgage rates fall to another record low.” Arizona Central. Feb 2, 2012.

“15 Year Mortgage Rates Enter Record Low Territory.” 24-7 Press Release. April 16, 2012

“Mortgage rates hit record lows” CNN Money. May 3, 2012.

“Another record low for mortgage rates” CNN May 10, 2012.

“Mortgage Rates in U.S. Fall to Record Lows With 30-Year at 3.83%” Bloomberg. May 10, 2012.

Despite, the interest rates already being at historic lows, there is a continuing downward pressure on interest rates. And with the European Crisis, the slowdown of Chinese and Indian economy, it looks like the world will needs a lot of available cheap credit to be to be able to prevent us from entering another global recession (or even a depression). In short, the Fed has indicated to the market that they are willing to do whatever it takes (and with the power that they have, they will succeed) to keep the interest as low as it is for the next 3 years. Also, it’s a good bet that the interest rate in New Zealand and Australia will still be kept relatively low during that same period. This means great news if you are a property investor looking to create passive income through properties (and not so much if you park your money in the banks).

If you are interested in learning more about how you can take advantage of the current crisis in America, please feel free to contact me at: chayot@property4prosperity.com

In my next article, I will be writing about how one market in the US has already seen a double digit increase in capital gain while also providing a double digit yield. And consequently, which other markets are very likely to follow next.

To Your Financial Freedom,

Chayot Ing-aram
BBS (Hons) & M(Fin)

International Property Professional
http://www.property4prosperity.com

America property Investment for New Zealanders

 

 

 

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Expert's Bio

Chayot Ing-aram

Chayot is the co-founder of Property4Prosperity, Inc. He lives and breathes property investing. He received his BBS with Honours and Master in Finance from Massey University. He has been featured in one of New Zealand’s bestselling property investing books, interviewed in New Zealand Property Investor Magazine, and worked in the Committee for the local Property Investors' Association. He is currently residing in L.A., California, where Property4Prosperity, Inc.’s headquarter is located.

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