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American Morning

Minding Your Business: What Should You Do in Low-Interest Rate Climate?

Aired August 14, 2003 - 07:45   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


DARYN KAGAN, CNN ANCHOR: Interest rates remain at a 45-year low. So, what should you do now with your money?
Andy Serwer is off today. With us is "Minding Your Business -- for "Minding Your Business" is author David Bach. He has written the book, "Smart Couples Finish Rich."

Smart anybody finish rich if you follow the rules.

DAVID BACH, AUTHOR, "SMART COUPLES FINISH RICH": That's right.

KAGAN: Let's talk about these interest rates. If the economy is doing so badly, why are they staying at the same place? Why not go even lower if there is anywhere lower to go?

BACH: It's a really good question. First of all, there really isn't a whole lot lower to go. The interest rate has been dropped 13 times since January of 2001. We're at a 45-year low. This has really helped to fuel the economy.

Put it in terms that the average American can relate to. It's very simple. If you had a mortgage costing $2,000 a month, rates have dropped so much that that same mortgage today is costing about $1,200. So, the actual cost of your home has dropped by almost a third a month because rates have come so low.

KAGAN: But we are seeing those interest rates starting to go up a little bit -- those mortgage rates.

BACH: We are -- the mortgage rates are starting to tick up, which is why it's very important right now that if you've been waiting to lock your mortgage or refinance, stop waiting. Even though Alan Greenspan just said he's going to keep rates low probably for the next quarter, I wouldn't wait. I would take action today.

KAGAN: OK. If the economy is like it is, then why is the bond market -- to use one of your terms -- why is it crashing?

BACH: Well, it's crashing for a very simple reason. There is nowhere for rates to go but up. Again, even though Alan Greenspan actually gave guidance and said we're probably not going to do anything in the near future, what that really means in layman's terms is rates are going higher. That's the only direction they can go.

The bond market is anticipating that. The bond market had the biggest drop in the last 30 days than we've seen in 25 years. If you had a 30-year treasury, it's down 15 percent.

Now, it's bad news for bondholders. It's good news, though, for people who need income. If you're a retiree, that's been dying because there is no income to be found on CDs, today those CDs that were 3 percent are paying as much as 4.5 percent. So, that's good news for people who are retired.

KAGAN: All right, let's take this information and put together a to-do list. What should you do with this information?

BACH: All right, the first thing, again, credit cards. Refinance your credit cards. Today, there are credit cards that have 0 percent interest. So, don't sit on these credit cards that have 14 percent interest.

Lock your loans. Don't wait on these mortgage rates to go lower. Lock your loans. Refinance. If you're refinancing, lock in a long- term rate. Get a 30-year mortgage.

The last thing is if you're going to buy bonds, buy individual bonds. Look at the I-bonds. These are bonds you can buy directly from the Treasury.

KAGAN: You can even go on the Internet and get them.

(CROSSTALK)

BACH: You can go on the Internet. You can go to treasurydirect.gov -- 4.6 percent right now. That's a great rate.

KAGAN: There is plenty to do even in the economy that looks like it's difficult.

BACH: That's right.

KAGAN: And you're going to be with us all morning?

BACH: I will. I'll be back next hour.

KAGAN: OK, great. Other great tips still to come. Appreciate it.

BACH: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.





Rate Climate?>


Aired August 14, 2003 - 07:45   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DARYN KAGAN, CNN ANCHOR: Interest rates remain at a 45-year low. So, what should you do now with your money?
Andy Serwer is off today. With us is "Minding Your Business -- for "Minding Your Business" is author David Bach. He has written the book, "Smart Couples Finish Rich."

Smart anybody finish rich if you follow the rules.

DAVID BACH, AUTHOR, "SMART COUPLES FINISH RICH": That's right.

KAGAN: Let's talk about these interest rates. If the economy is doing so badly, why are they staying at the same place? Why not go even lower if there is anywhere lower to go?

BACH: It's a really good question. First of all, there really isn't a whole lot lower to go. The interest rate has been dropped 13 times since January of 2001. We're at a 45-year low. This has really helped to fuel the economy.

Put it in terms that the average American can relate to. It's very simple. If you had a mortgage costing $2,000 a month, rates have dropped so much that that same mortgage today is costing about $1,200. So, the actual cost of your home has dropped by almost a third a month because rates have come so low.

KAGAN: But we are seeing those interest rates starting to go up a little bit -- those mortgage rates.

BACH: We are -- the mortgage rates are starting to tick up, which is why it's very important right now that if you've been waiting to lock your mortgage or refinance, stop waiting. Even though Alan Greenspan just said he's going to keep rates low probably for the next quarter, I wouldn't wait. I would take action today.

KAGAN: OK. If the economy is like it is, then why is the bond market -- to use one of your terms -- why is it crashing?

BACH: Well, it's crashing for a very simple reason. There is nowhere for rates to go but up. Again, even though Alan Greenspan actually gave guidance and said we're probably not going to do anything in the near future, what that really means in layman's terms is rates are going higher. That's the only direction they can go.

The bond market is anticipating that. The bond market had the biggest drop in the last 30 days than we've seen in 25 years. If you had a 30-year treasury, it's down 15 percent.

Now, it's bad news for bondholders. It's good news, though, for people who need income. If you're a retiree, that's been dying because there is no income to be found on CDs, today those CDs that were 3 percent are paying as much as 4.5 percent. So, that's good news for people who are retired.

KAGAN: All right, let's take this information and put together a to-do list. What should you do with this information?

BACH: All right, the first thing, again, credit cards. Refinance your credit cards. Today, there are credit cards that have 0 percent interest. So, don't sit on these credit cards that have 14 percent interest.

Lock your loans. Don't wait on these mortgage rates to go lower. Lock your loans. Refinance. If you're refinancing, lock in a long- term rate. Get a 30-year mortgage.

The last thing is if you're going to buy bonds, buy individual bonds. Look at the I-bonds. These are bonds you can buy directly from the Treasury.

KAGAN: You can even go on the Internet and get them.

(CROSSTALK)

BACH: You can go on the Internet. You can go to treasurydirect.gov -- 4.6 percent right now. That's a great rate.

KAGAN: There is plenty to do even in the economy that looks like it's difficult.

BACH: That's right.

KAGAN: And you're going to be with us all morning?

BACH: I will. I'll be back next hour.

KAGAN: OK, great. Other great tips still to come. Appreciate it.

BACH: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.





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