All people have heard around interest rate hikes are gloom and doom, but there is some good news about interest rates going higher. Don’t tune me out just yet, let me explain why it could be great news for a lot of people.

Housing Market:

As soon as interest rates started going up the housing market started cooling down. Before the hike the only people affording homes were those with deep pockets, hedge funds, and companies looking to make a profit. That first time home buyer didn’t have a chance. Now that mortgage rates are going up those same people are leaving the market which means prices of houses will decrease and first time homebuyers will soon be in position to buy again. We are already seeing more houses on the market and the prices of items to build a house such as lumber are drastically decreasing. As a first time home buyer you may have higher mortgage interest rates, but these houses could soon be $100,000-$200,000 less and that is a win all thanks to the Federal Reserve!

Savings Rate:

0 or low interest rates like the ones we have been seeing for the last two years was not good news for your savings accounts. Now that the interest rate is rising, so will the rate on your savings account. Some are thinking the savings rate will reach 2% by the end of the year. Right now it is not even reaching 1%. The Federal Reserve kept the interest rate low to get Americans and companies to spend money and prop up the economy. Now the economy is too hot so now they are raising rates so that the American people and companies will pull back on spending and as a result of that save more money. Another side effect of that action is that retail stores end up having more supply on hand and have to put everything on sale to move it out the store. There are sales in almost every store that you can take advantage of and all of this is thanks to the interest rate hike from the Feds!

Forces Action:

The hike in interest rates makes borrowing money more expensive. It also makes current debt with rates tied to the federal interest rate more expensive. That includes credit card debt. There are many people who carry a balance and have been meaning to pay that balance off. Now that the rate on your credit card is going up it may force you to pay the balance off. If you can’t pay the balance off then you need to move it to a 0 interest credit card. Your last resort will be to call the credit card company and ask for a lower interest rate so that you are able to pay it off in the near future.

The rising of the interest rate is good in many cases and the most important outcome of it will be the bringing down of inflation. That one outcome will benefit everyone!

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