Some news is a mixture of good and bad, and that’s certainly the case with our topic today. Last month, the Federal Reserve announced a rate hike. With the benchmark federal funds rate increasing by 25 basis points, that will translate to an interest rate increase of 1.5 to 1.75 percent.
This could be good news or bad news, depending upon your individual situation, but the rate hike definitely reflects on very positive trend: The Fed released a statement along with the news of the increase, stating that the decision was based upon low unemployment, gains in the job market, and a strengthening economy overall.
A growing economy is always fantastic news, but what about the individual?
Yes, your money will earn more interest. The interest rate paid on savings accounts or CDs has remained quite low in recent years. The good news is that a rate increase will help your money earn more interest, especially if you engage in a bit of comparison shopping to locate the best interest-earning account to stash your funds.
You will also pay more in interest. The bad news, of course, is that higher interest rates mean you pay more to borrow money. If you’re carrying credit card debt, watch for those rates to increase. Rates on personal loans, or auto loans, will increase as well, although those are less of a concern at this time.
The main thing to monitor is adjustable-rate mortgages. A rate hike will impact that area, and normally more rate hikes follow within the coming year. If you’re involved with an adjustable-rate mortgage, now is probably the time to refinance into a fixed-rate deal. It’s unlikely that rates will come back down any time in the immediate future.
Of course, this is very generalized information, and the rate hike might affect you differently from most people. If you have any questions about your current or future financial outlook, remember to call us to schedule a meeting. We can help you decide if you need to make any changes, and identify possible solutions to any dilemmas.