A Valuable Financial Lesson From Foreign Powers

Your opportunity to act won’t last indefinitely.

A Valuable Financial Lesson From Foreign Powers

At this writing, Japan is planning to issue a government bond that won’t mature for 50 years. Investors would receive annual interest of less than 2 percent. Currently, 40-year debt is the longest term issued by Japan.

Japan isn’t alone. France and Spain each sold 50-year bonds this year, letting them lock in today’s low rates through 2066. The French government pays just 1.75 percent. Other countries have even longer-term bonds: Ireland and Belgium have both sold 100-year bonds this year.

It’s easy to understand why these governments want to sell bonds that don’t mature for 50 or 100 years: They get to pay historically low interest rates for decades, saving themselves (and taxpayers) money for multiple generations.

But why would investors find such long-term bonds attractive? A lack of options, frankly. Many nations have issued debt with negative yields. About $9 trillion of government debt, representing a third of the global total, has negative yield, according to JPMorgan Chase. That makes 1.75 percent look pretty good by comparison.

So we have just one question for you: Why aren’t you doing the same?

You, too, have an opportunity to get a historically low interest rate — and lock it in for 30 years! I’m referring, of course, to your mortgage. You can get a 30-year mortgage with a fixed rate of as low as 3.5 percent today.

If you are still paying 3.75 percent or more and plan to own your home for five years or more, talk to us to see if refinancing makes sense.

Do it now, because low rates won’t last indefinitely.

Originally published in Inside Personal Finance October 2016

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