A financial adviser discusses rising interest rates
MONTGOMERY, Ala. (WSFA) – The Federal Reserve raised interest rates by half a percentage point last week to rein in the worst inflation the United States has seen in 40 years. This is the second increase in two months and the largest increase since 2000.
“A 50 point increase that we just had is one of the highest we have had in the past two decades. It’s usually a quarter percent more, a quarter percent less. So it can be a bit of a shock to people,” said Marc Hall, financial adviser at Ariss Financial Group. “Right now the underlying fundamentals of the stock market economy aren’t that bad. We’re seeing good earnings, we’re seeing good growth. It’s just this pressure right now of things costing more We pay for the closings for the last two years.”
So what does rising interest rates mean for your portfolio? Hall says your financing costs will continue to rise. Borrowing money will become more expensive with higher interest payments for car loans and credit card bills.
“Interest rates will rise even more over the next few years. So you have to pay attention to things, if you have credit card debt, if you have revolving rate debt, variable rate debt, those are things that you need to look at right now and look at and see if there are ways to consolidate this. Because you’re going to pay more for the short-term ones,” Hall said.
Within a billing cycle or two, your Annual Percentage Rate, or APR, will increase. Home equity lines of credit are also adjusted upward immediately.
“Your chance to refinance or things like that are probably in the rearview mirror right now. You don’t want to do that because home loan interest rates over the last six months have gone from about 3% to a interest rate over 30 years to about five and a half years,” Hall said. “That’s a huge difference in the amount of money you’re paying over time. This is where the problem can arise in that maybe a house you could afford the mortgage on a few months ago, maybe a little more out of control now than it was.
Investors are worried about high inflation and the Federal Reserve’s interest rate hike. The race on Wall Street has been bumpy lately, but Hall says if you have money invested in stocks, now is not the time for major overhauls.
“When it’s all happening at the same time, it can get really scary when you see a lot of red on the screen for a few days. But what I talk about on the phone with clients every day and with personal clients every day is It’s about sticking to your long-term plans because we knew things like this were going to happen. But we’re looking at how it affects us 10, 15, 30 years later. Don’t take of rash decisions based on emotion. That’s where you get the problem,” Hall said.
Hall advises people to consult a financial advisor who can better guide them and help them plan for the future.
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