Money Matters, Simplified.
Interest rates to rise in US
by Jaspreet Virk - April 11, 2010 - comments
The economists believe that the average rate for the 30-year loan may increase to 6 percent, the level which was last seen in November 2008.
Americans have for long enjoyed the low interest rates. Now with the nation’s economy back on the road to recovery, consumers will be facing a financial burden of rising interest rates.
According to economists, interest rates will rise to surmount the ever increasing debt and prevent inflationary trends in the nation.
"Americans have assumed the roller coaster goes one way," said Bill Gross of investment firm Pimco. "It's been a great thrill as rates descended, but now we face an extended climb."
Hike in fixed mortgage rates
The interest rate of 30-year home loan has already increased from around 5 percent to more than 5.2 percent, and it is at its highest level in eight months.
The average rate of the fixed mortgage has increased to 5.21 percent from 5.08 percent a week earlier, according to Freddie Mac, the mortgage company.
The impact of rising interest rates will be felt by the housing sector the most, as mortgage rates are unlikely to go lower than they are now.
In August the interest rate was 5.29 percent, and it dropped to its lowest level in December, when it was 4.71 percent.
The economists believe that the average rate for the 30-year loan may increase to 6 percent, the level which was last seen in November 2008.
Further, the interest rate on a 15-year fixed-rate mortgage was also hiked to 4.52 percent from 4.39 percent last week.
Housing market feels the pressure
The impact of rising interest rates will be felt by the housing sector the most, as mortgage rates are unlikely to go lower than they are now.
In a statement Craig Strent, co-founder of Apex Home Loans in Bethesda, MD, said, “We are seeing some panic among potential buyers who have not found houses yet.
“They’re saying: Man, I should have found a house three weeks ago or last month when rates are lower.”
In February, the number of existing homes for sale rose 9.5 percent, according to the data released by National Association of Realtors.
Since the government tax credit for first time home buyers is ending this month, home sales are expected to jump.
Rates in other areas to affect consumers
Apart from the mortgage rate, the increase in interest rate on credit card is also likely to affect consumers.
The interest rate on credit cards jumped to 14.26 percent in February, the highest since 2001.
Further, interest rate on car loans, which has increased to 4.72 percent in February from 3.26 percent in December, will also have an impact on consumers.