Recent Recession

The economy fluctuates due to various reasons, as per the opinion of the economic analysts, by the uneven government policies and by the innate nature of the market. Fluctuations in the economy are now a natural element of life. The modern life has also to bear the political responses due to the fluctuations in the economy. With the sharp nosedive observed into the property market, many people prefer to invest their surplus resources into real estate. The interest rates on the loan to be issued goes down compared to the interest earned on the deposits. The major activity of any financial institute depends on the investment and to earn profit through various sources. They have lot deposit and so as to offer the interest on the deposit, they have to invest those deposits into some fruitful or beneficial investment. It has been observed that interest rates during recession go down as no one requires the commercial or personal loans from the bank. The government tries to excite the economy by lowering the interest rates in recession. Since the government is controlling the rate of interest, it makes easier for the bank to get liquidity. The lower rate of interest affects the business as they can get the loans on the favorable rates. The forex business declines due to lower value of the local currency against the strong foreign currency. Many business houses dealing with import or export business tend to keep their commercial activities on hold due to potential loss in the business. The interest on credit card normally does not decline but the new issues of credit cards offering better interest rates during recession. Recession and interest rates are related to each other; the rates are lowered during the recession and normalized once the recession is over. The interest rates on home equity loan and mortgage declines to some extent as banks have large surplus of funds to offer. Mortgages are long term debts so they react slower to short termed interest fluctuations.