Thursday, May 29, 2008

Tough Times? -- Hard to blame interest rates.

How many times have we yearned for “the good old days?” Raise your right hand if you think interest rates are contributing to the current volley of “tough times.”

The next time you are concerned about loan interest rates, consider the following:

The Prime Rate, the barometer that is often considered the cornerstone of rate pricing, is 5.00% today. How does today’s 5.00% Prime Rate compare with previous years?

Forty years ago today, the Prime Rate was at 6.50% and was on its way upward. By the way, the average price of a gallon of gasoline was $0.33 in 1968.

As a point of fact, the Prime Rate has been at or below 5.00% only a handful of times in our recent history. During the first six months of 1972 it hovered between 5.00% and 4.50%. The next time it was as low occurred during the period between November 2001 and December 2004. Since then, it spiraled up to 8.25% in June 2006 before beginning downward movements to today’s 5.00%.

So, in the past 40-years, the Prime Rate has been at or below 5.00% for only 40 months. Not even 3.5 years out of 40 years. Based solely upon interest rates, we are currently experiencing “The Good Old Days!

These comparisons are not to infer that we, and our neighbors, don’t have problems. Certainly there are problems. Gasoline is at an all-time high. Many of our everyday products are made from, or with, petroleum. Thus, some prices are rising. Because of some foolish decisions made in the past, many mortgage lenders are afraid to finance houses (not so at Hawthorne!). House values are falling rapidly in many areas of the country (not so much in our immediate area).

However, none of the current problems will last forever. All present concerns are “fixable” or “livable.” The housing market will turn around and eventually be as robust as ever. Gasoline will either drop in price or we will find methods to become less reliant on it.

Tough times call for crafty economizing. Moving forward, the real action will be in how we let these difficult times impact our lives.

If you are not already a member,
joining the credit union would be a step in the right direction. With lower fees and better rates you can increase your savings. Hawthorne offers a wide-range of loan opportunities for our members. From Cadillacs to Volvos, a dream home to a dream vacation, Hawthorne Credit Union has a loan to fit your needs - and always at an attractive loan rate.

Hawthorne also offers a wide variety of savings accounts that you can use to save for your future. Plus, your deposits are insured to $350,000 — the first $100,000 is federally insured by NCUA and the next $250,000 is privately insured by ESI. This is the highest combination of federal and private deposit insurance available to consumers.

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