If the Federal Reserve raises rates, consumers will likely feel the effects. When rates go up, banks tend to increase the prime rate, and this will have an impact on certain financial products. A prime rate is the lowest rate of interest at which money can be borrowed at commercially. So when the federal government raises rates and the prime rate goes up, it create a rise in interest rates on many of your everyday financial products. What does this mean for you as a consumer?1
Credit Cards
- Most credit cards carry a variable rate which is tied to the prime. Therefore, when the prime goes up, card issuers usually pass these increases on to consumers.
Home Equity Lines of Credit
- Similar to credit cards, home equity lines of credit (HELOC) often carry a variable rate. Therefore, when interest rates rise, so does the borrower’s payment.
Mortgages
- New adjustable rate mortgages are also affected when rates increase, although not necessarily at the same pace.
If interest rates are too high for you and the payments you have to make are becoming too much, a reverse mortgage may be a good financial option. Take advantage of current rates while they’re still low! If you are 62 or older and are interested in accessing a portion of your home’s equity to obtain tax free2 funds a reverse mortgage may be for you. You can call us today at 800.218.1415 for a free personalized no-obligation assessment and possible pre approval on a loan. Let’s see if we can help you on the road to an easier retirement.
1 What to Expect Now That the Fed Has Begun Raising Rates – aarp.com, 12/15/15, http://www.aarp.org/money/investing/info-2015/what-to-expect-when-the-fed-raises-rates.html.
2 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.