Increasing Interest Rate a Threat for the Market?

Federal Funds Rate 2000-2015 copy

Often we are asked, what we think about the threat of an increase of the interest rate. For the investment climate the interest rate is always very important. Today’s worldwide the interest rates are extremely low and even negative in Switzerland. The Federal Funds Rate in July 2015 was 0,13% (see chart). Because of these low interest rates, many savings are used for investments, such as investment in classic cars.

The danger exists that if the interest rates go up substantially, people sell their classic cars, take their profits and put their money back on their savings account again. This could have a negative effect on the prices of classic cars.

But many financial analysts expect the interest rate to be low for at least another three years, and probably also for many more years. The national debts of many countries are very high and if the interest rate would be increased, many governments and organizations would get into trouble. Besides that, low interest rates stimulate consumption, which is also very welcome in many recovering economies.

So the general idea is, that the national and central banks will not let the interest rate increase substantially in the near future. And if the interest rates would be increased, it will be done very, very slowly and any negative effect on the classic car investment market, will probably be absorbed completely in the beginning. After that, when the interest rates have increased substantially, this could have an impact on classic car values. But we do not expect this in the near future.

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