What is the effect of low interest rates on customer borrowing?

Low interest rates lead to a reduction in the cost of borrowing for customers. When interest rates are low, the amount that customers need to pay back on loans decreases, making it cheaper for them to take out loans or borrow money. This lower cost of borrowing can stimulate spending as consumers may feel encouraged to finance large purchases, such as homes or cars, due to the more favorable repayment terms. Additionally, businesses may also benefit from lower rates when they're seeking loans to invest in their operations or expansion plans.

In contrast to other options, where borrowing is discouraged or customers are more cautious, the environment created by low interest rates tends to favor increased borrowing activities as the perceived financial burden is lighter.