We always strive to bring you the financial news that will affect you personally, whether good or bad. Of course, events can impact us all differently, so often the effects of a particular news item will depend upon your own situation.
That’s certainly the case with the interest rate hike, announced last month by the Federal Reserve. The increase of about 1.5 to 1.75 percent came along with an encouraging statement, regarding low unemployment, job gains, and an overall improving economy. Typically, a strengthening economy is great news for all of us, but how will the interest rate hike affect you, as an individual?
In a nutshell, it depends on whether you have money or owe money.
Your money will earn more interest. If you have funds in a savings account or CD, you should earn an increased interest rate on that money. Of course, the interest rates paid by banks can vary, even within your own town. So remember to compare rates and switch, if needed, to a bank, credit union, or online bank that offers the best return on your savings.
You will pay more interest when you borrow. The downside of the rate hike is that credit card interest rates will jump a bit. If you haven’t already made a plan to get out of debt, now is the time to double down on your efforts. Otherwise you will simply spend even more money on credit card interest, and it will take even longer to get out of debt if you aren’t careful with your budget.
Home Equity Lines of Credit will increase. If you have a fixed rate loan on your home, then you won’t see any affect. However, if you have an adjustable rate second loan or a home equity line of credit (HELOC), you’re likely to see your payment go up. Talk to your lender so you won’t be surprised by the increase. You may have options for refinancing the loan if you are concerned.
The above information is quite generalized, and you might be affected by rising interest rates somewhat differently than the average person. For a more detailed analysis of your current financial situation, as well as your future prospects, give us a call to schedule a personal appointment.