The Federal Reserve recently announced its first interest rate hike since 2006, leading to a great deal of speculation about the possible effects on the economy, the unemployment rate and consumers.
The last time the Fed increased interest rates, the decision came in response to the recession and the housing crisis. Since that time, interest rates have remained near zero while the economy struggled and economic growth stagnated. The logic behind the low rates was that small businesses, as well as consumers, would be more inclined to take out loans and then pump that borrowed money back into the economy by spending it.
Now, with the U.S. finally having shown signs of a full recovery from the recent recession, the Fed Reserve has revealed that it will be raising interest rates by a quarter of a percentage of a point. Although the rate hike is relatively small in comparison to previous rate hikes, the fact that interest rates are being raised at all is noteworthy and could have a major impact on many small business owners and consumers.
Of course, the interest rate hike could have a significant effect on a number of different areas, including:
- Home Mortgage Rates: One obvious effect of the Fed rate hike is that mortgage loan rates will increase, potentially causing havoc for potential homebuyers and homeowners, including anyone who is currently locked into an adjustable-rate mortgage, or variable-rate mortgage, where the loan is periodically adjusted in accordance with the credit market. Anyone who currently has an adjustable-rate home mortgage might want to think about refinancing in order to avoid higher rates down the line.
- Credit Card Rates: A higher federal interest rate means that people will end up paying more in interest on their credit card debts. Although it is usually a good idea to avoid credit card debt, this could become even more important in the aftermath of the Fed rate hike.
- Car Loan Rates: New car purchases are going to come at a greater financial cost, especially as more and more people are choosing to offset their auto purchases with expensive car loans.
- Savings Accounts: Many people who currently keep great sums of cash in their savings accounts might be excited by the thought of higher interest rates. Unfortunately, the Fed’s recent rate hike is unlikely to have a significant impact on depositors’ savings rates in the short-term.
To learn more about the implications of the Fed interest rate hike, check out the Yahoo.com article entitled, “What the Federal Reserve Interest Rate Increase Means for You.”
If you are a potential homebuyer looking to purchase property in New Jersey, or if you are a current homeowner looking to refinance your mortgage, Joel R. Spivack, Esq. is an experienced real estate lawyer who can help you. Contact us today for a free consultation.