Tuesday, January 10, 2017

How Do Rising Interest Rates Impact You?

For the second time in seven years, the Federal Reserve has raised interest rates. The recent raise in December, coupled with the Federal Reserve's hints that it intends to raise rates again in 2017, will have a definite impact on consumers like you. First Bank of the Lake is here to help you learn how you may be impacted and what steps you may want to take to prepare for the rising rates.

How Do Rising Rates Affect My Credit Card?

For many credit cards, the amount of interest you pay on balances carried over from month to month can be variable. This means that if the Federal Reserve raises interest rates, your credit card company may choose to raise its rates right along with them. If it is at all feasible, paying off your remaining credit card debt now is an important way to prevent yourself from racking up increased debt as a result of the new rates.

If paying off your credit all at once is not possible, you may instead want to determine if there are credit card options that offer lower rates or if you qualify for a fixed rate loan at a financial institution

What If I'm Thinking About Buying Or Selling A Home?

If you're thinking about selling your home, rising interest rates may actually be beneficial, as buyers who anticipate rising interest rates may make it a point to purchase a home sooner than later. Of course, the same logic applies to you if you are the one thinking about buying a home - the longer you wait to purchase, the more likely you are to get stuck with a higher interest rate on your mortgage loan. Also, if you've been thinking about refinancing your home but haven't gotten around to it yet, now may be your last chance to take advantage of these historically low interest rates.

What About Student Loans?

Federal student loans have fixed interest rates, so they shouldn't be affected by rising interest rates. If you have a private student loan, however, you may want to contact your lender to find out if your interest rate is fixed or variable. Note that the increase in interest rates isn't expected to be immediate or drastic, so even if your rate is variable, you should have a little bit of time to pursue some refinancing options.

What Is The Big Picture Of Rising Interest Rates?

When banks make loans or pay interest for deposits in a savings account, they determine the interest rate by using the Federal Reserve rate as a baseline. Therefore, when the Federal Reserve’s interest rates go up or down, the amount that banks charge for a loan or pay on deposits can go up or down as well.  

With interest rates at or near 0% over the last several years, those looking to save money have received very little interest for their savings. Meanwhile, those who have borrowed money have been able to do so relatively inexpensively.  

Rising rates will make it more attractive to save money because banks will pay a higher interest rate on savings deposits (although rates will likely stay at historic lows in the short term). Those looking to borrow money should expect to pay more than they have in recent history. Therefore, if you’re looking at financing consumer purchases like automobiles, furniture or appliances, you’ll want to do so soon to get ahead of additional interest rate increases.

Rising Interest Rates Are Good News For The Economy!

While rising interest rates signal an overall positive turn in the economy, they do have definite impacts on consumers. For consumers who have entered the workforce in the last seven years, the shift to a rising rate environment can be hard to understand. But, with a little foresight and planning, you’ll be positioned to insulate yourself from the hardest impacts of rising rates. Hopefully, you’ll be able to enjoy some of their benefits with greater interest on your hard earned savings. 

For more information about how the rising interest rates may impact you, or to shop debt consolidation loan options at your local bank at the Lake of the Ozarks, contact us today.

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First Bank of the Lake - Striving For Excellence
Member FDIC. Equal Housing Lender.

Located at the entrance to the Osage Beach Premium Outlets!

4558 Osage Beach Parkway
Suite 100
Osage Beach, MO 65065

(573) 348-2265

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