Do interest rates go up, or down, in a major recession?

Interest rates are directly tied to the direction of the 10 yr treasury bond. When there is a recession the stock market will be very unreliable and investors will flee to the safety of bonds at which point supply and demand take over driving the price of bonds up and there interest yield down. End result...rates fall.

I write a blog on the subject of credit management, mortgages, real estate trends, etc. Check it out for more information that may be helpful.

Interest Rates During Recession

Yes, the gas prices (in terms of constant dollars) are equal. What was great about the Carter years was if you had money, you could get 15% on T-Bills. The only problem was if you weren't rich and wanted to buy a house, the interest rates were 18%. The absolute worst part was the gas lines, he tried to artificially keep prices low (lower than some were willing to sell for, so there was an artificial shortage).

Interest rates will depend on the inflation rate, given the current policy of the US Federal Reserve. If inflation rates go down, then interest rates will go down -- and inflation rates show signs of going down now. Interest rates are following, although slowly. So I'd say you should look for slightly lower rates in 2007.

Rates will go up because less people will have money to buy bonds and bond sellers will increase the rate they are offering in order to sell their bonds.

Rates will go down because fewer businesses will need to borrow less money and investors will have to pay more to get bonds which lowers rates.

The FED will manipulate rates lower to spur an increase in business.

I'm about 15K down myself and I worry about it too.

I think interest rates go LOWER in a recession. The FED does that to spark the economy I think.