General Finance

What Increasing Interest Rates Mean for the People of the U.S.

Interest rates can simply be defined as the amount of money an individual has to pay in addition to the principal in the event of a loan acquisition. Interest rates differ depending on the financial institution involved, but in the event of a mandatory increase by the US Federal Reserve, one needs to reassert themselves. Interest rates can really be favorable if set right, but with this increase in rates by the Feds there are a lot of resulting implications for US residents. In this piece, we will explore some of the major effects of living in areas with increased rates of interest.

Ironically, there are certain things that also increase when interest rates rise while other things decrease. Some of the factors that increase due to interest rates rising are:

 

Borrowing Rates                         

Due to the increasing interest rates set by the Feds, banks and credit institutions will also increase their applicable rates of interest as a means of minimizing loss. This includes prime rates for clients that have excellent credit scores and are deemed credit-worthy. This rate is not only applicable to banks and financial institutions, but also to companies that have to pay a certain percentage in taxes to the government. These companies have also increased the price of their shares as a means of covering up the amount lost. This definitely takes a negative toll on the people in the US.

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Increase in Consumer Savings

With the intense increase in interest rates by the government, as well as the subsequent increase in interest rates of privately-owned institutions, a consumer may find themselves more willing to add pennies to their piggy banks instead of borrowing from a bank.

No one wants to spend more money than they have to and instead of going ahead to borrow money from a bank at insane costs, many prefer to save up and purchase whatever they have in mind.

As we stated, there are some features that decrease with the rise of interest rates. Here are some of the factors we may see declining as interest rates increase:

Property Sales

As interest rates inflate, there are only a handful of people that will go forward with purchasing homes and private properties. This is because many realtors and property owners will most definitely increase the price of the property based on recent development – ultimately discouraging purchases.

Spending

You shouldn’t’ expect to see anyone going on a shopping spree during this federal interest rate hike. Both credit and debit cards are also having an increase in their charges, therefore discouraging many US residents from making purchases both on and offline. Let’s not forget that the increase in an individual’s saving during this period further discourages frequent spending, as most people are seen living on a frugal budget.

For reasons best understood by the government, whenever there is an increase in interest rates by the Federal Reserve, there are more people in the US resulting to intense budget cuts. This is due to them no longer being able to afford some of the things that they once could.

Bottom line

With an increase in interest rates, we can expect an increase in a lot of things – which may not always be good for the everyday US citizen. For example, borrowing will become more expensive for consumers looking to acquire a loan for a car or home. This also translates to increased prices on goods due to inflation caused by increases in the borrowing rate. Interest rate increases aren’t all bad, though. This rise in interest may likely lead to an increase in your savings account, more money made on what you save, and rises in bond prices. If you’d like to learn more about how the interest rate increase will affect you, check out these book on the subject and learn how you can succeed in this new upcoming future. The Creature from Jekyll Island by G. Edward Griffin  & Interest Rate Cycles: An Introduction by Brian Romanchuk

If you would like to Try Audible and Get Two Free Audiobooks, and use one of those on the books above and you can learn more about how interest rates affect you.

 

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