High Interest Investment

Can someone explain to me the pros and cons of high and low interest rates?

i.e When is the best time to buy a house? when interest is high or low? What are other kinds of investment that has to deal with interest rates and how so?

Public Comments

1. Best time to buy house is when you become homeless.
2. If you owe money (Credit Card, Home Loan, Car Lone, Personal Loan), low interest rates. If someone owes you money or you are investing money, high interest rates. All investments deal in interest rates, unless you are dealing with a fixed bond (which is basically interest, just not much). The higher the rate, the better return you will see on your money, the lower the rate the less money you will see. If you are investing money, you want a higher rate so your money makes more money for you. If you are buying something, you want a low interest rate so more of your money goes toward paying off what you are buying instead of going to pay for the interest. In the Stock Market, rates are determined after the money is made or lost based and on how long it took to get that way. If you double your money in a year, then the rate is 100%, if you lose half of your money, then the rate is -50%. Your average savings account gives between 1%-3% per year for just having your money sit there, not great, but better than sitting under your bed...
3. Broad subject. The answers can not be explained without going into other areas aswell. Quite generally speaking interest rates are of the macroeconmic part which are the study of the sum of individual economic decisions. If interest rates are high, or increasing rather - you will see a decline in investments being made. And the opposite if rates are declining. Most countries has a organization that set the interest rate according to the current and wanted financial situation. IE. it play a dominant part of balansing economic growth, price stability and employment. The lower interest rate will save you more in the long run. Ideally you would purchase a house at the lowest possible interest rates, but doing so requires a great interest in economics, tedious analytics and luck. In 2004 it was at the 40year low and would have been a very good time to buy a house if you planned on living there for a long time. Ofcourse all of this is only applicable if you took up a mortgage. House pricing has little effect as a total. If housing fell in value due to supply, demand or otherwise, you would expect that to happen to everybody within geographical reason and not just yourself, even the palace down street would get hurt by this. Every investment applies interest rates. High rates tell that the economy is stable while low rates tells that the central bank is worried that the economy is weakening. These elements play a major role for any investors. In the end it's about what risk the investor is willing to take for said reward.