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What interest rate hike means for your spending

Posted at 8:07 PM, Jan 27, 2022

WEST PALM BEACH, Fla. — The Federal Reserve is stepping in after a long run of lower interest rates. The rates banks borrow and lend at are going up.

Buyers are already facing delays getting the car they want because of inventory. Waiting too long could mean you’ll be paying more now that interest rates are set to go up. But financial experts say there are also pros to rising rates.

An 18-month delay to get his new Ford Bronco, Patrick Tighe would have paid less interest on his new car had it been in stock when he ordered it in 2020.

"I think it was maybe a point and a quarter. Yeah, it was a big difference," Tighe said.

This week the Federal Reserve shifted interest rate hikes into gear. The effect will be rising rates for borrowers.

"That means if you’re in the market or a house or you’re looking to take out a small business loan you’re going to have to be willing to pay a higher rate," said William Luther, an associate professor of economics at Florida Atlantic University.

Luther says the forces pushing up interest rates will also cause an increase in production of goods and services plus more employment opportunities.

"If anything we should welcome those higher interest rates, because they are making it possible for us to bring down this relatively high inflation rate that we’ve seen over the last six months or so," Luther said.

According to the American Association of Retired Persons, higher interest rates can benefit retirees savings accounts.

A con for borrowers besides higher rates on loans, don’t carry around debt on credit cards because you pay may more interest too.

And if you’re going to refinance for a lower rate, do it now.

"It seems like rates are going up and they are not going to come down," Tighe said.