Chart Interest Rates and Watch ‘Em Climb
Chart interest rates over the next months and years, and the diagram will keep climbing uphill.
So says a New York Times article (“Interest Rates Have Nowhere to Go but Up”) published on Saturday.
Let’s chart interest rates for credit cards, for starters. With the Federal government breathing down their throats to comply with new regulations, credit card companies will have no choice but to start increasing interest rates when they can. Indeed, credit card interest rates have steadily increased in all but one month since the fourth quarter of 2008, according to the Federal Reserve’s statistical release on consumer credit. In February, interest rates were about 14.26 percent; a year prior, they were 12.97 percent. Given the nation’s total revolving credit card debt of about $860 billion, this amounts to a hefty chunk of change that is coming straight out of your pocket and into the pocket of credit card companies.
According to the New York Times article, credit card interest rates might increase to 16 or 17 percent by autumn. (Visit our site dedicated to credit cards and credit scores for more information.)
Coupled with rising interest rates, all this credit card debt could lead to increased bankruptcies.
And if you chart interest rates for mortgages, you will see another upward trend. Last week, I wrote about the ending of the Fed’s plan to buy $1.25 trillion in mortgage-backed securities, noting that some fear mortgage rates might climb. In last week’s blog, interest rates had already climbed to 5.08 percent from the week prior. And by this time next year, the largest percentage of primary dealers polled by Reuters and posted by Mortgage Bankers Association predicted interest rates would be at 6 percent or above.
Let me put this into perspective: On a 30-year, fixed-rate, $300,000 home loan, this is a difference of $62,455. A person with a 6 percent interest rate pays about $174 more a month and $2088 a year than a person with a 5.08 percent interest rate.
How about we chart interest rates for autos? No surprise: they jumped from 3.94 to 4.72 from January to February.
Okay, so you are probably starting to see a trend. Chart interest rates, and you’ll see them going up and up and up…
unless you do something about it. Learn how to build your credit score so you can qualify for lower interest rates!
Chart Interest Rates and Watch ‘Em Climb
