How Rate Changes Could Affect Consumers
The strong job market, low unemployment rate and rising wages are all good signs for the economy, but have posed a rising risk of inflation. To offset this inflation risk, the Federal Reserve has gradually raised interest rates, which has the eventual effect of slowing the economy. This continued rise in interest rates over the last two years has been both good and bad news for consumers. If you are a saver it has been positive; if you’re a borrower it has been painful. The increase in rates affects mortgages, credit cards, home equity loans and car payments to mention just a few, thereby affecting the disposable income of consumers. Costs to Homeowners Homeowners with fixed-rate mortgages are unaffected by a raise in rates but an increase in rates leads to rising interest payments on variable mortgages. For example, a half percent rise in rates on a $100,000 mortgage translates...
