This article examines the reasons why interest rate in US will go up. It is the outcome of the nation's ballooning debt and the renewed prospect of inflation as the economy recovers. Consumers, however, are about to face a new financial burden with a sustained period of rising interest rate.
The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week, the highest level since last summer.
Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.
It will be interesting to see the effects of the change in interest rate and the housing market on the economy.
ReplyDeleteI think that with all the cutting of rates that the Federal Reserve has done in the past few years it only seems to me that interest rates can only raise. I found it surprising that a 1% point increase in rates can add as much as 19% to the total cost of a home. This is probably why the Fed has been so hesitant to increase rates.
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