11 May 2022

Do Interest Rates Go Up in a Recession?

Recession and Interest Rates

When a recession sets in, it means that the economy has started running sluggishly.  The economy could have overheated and now the public and companies have started to feel the correction. If companies and the public borrow too much, they will reach a point when they must focus on repaying their debts. Therefore, they stop funneling money into the company. To encourage the public to continue buying, the Reserve Bank of Australia might lower the cash rate. Lowering the cash rate means that lenders can complete transactions with each other at a lower cost. The same way that they pass on higher costs to the public, lenders will lower interest rates to help them out. 

Lenders need the public to borrow. Thus, lowering the rates entices them to borrow to renovate their homes, consolidate their debts, and fund a child’s higher education. The economy is a series of intertwined pieces, and everyone must participate to make it work.

There have existed times when central planning did not lower rates during a recession. Therefore, homebuyers must keep an eye on the changes and policy occurring. Real estate is a hedge against poor economic conditions. Thus, it’s worth becoming a homeowner. In addition, we provide online resources to help homebuyers prepare their finances for their purchase. 

If you’re in the market to purchase a vehicle, check out our online Mortgage House car loan calculator too.

Recession and Interest Rates Conclusion

In most cases, interest rates will decline during a recession. Mortgage House provides competitive rates to most clients in all economic conditions. Contact our team to start the process.

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