What Higher Rates Can Mean For You
- Sep 14, 2016
- admin
- Investing
When the price of money increases how does it affect you?
Do your credit card bills move a bit higher?
Does the interest on your adjustable rate mortgage increase your home payments?
If you answer “yes” to any of these questions than you’re like 80% of all Americans who have borrowed money to finance their lifestyle.
Why is that important?
Since 1998, households’ debts (from mortgages to credit-card balances) have ballooned from 90% of our annual disposable income to some 114%, a record high.
In other words: The average American family, whose earnings are approximately $50,000 annually, has $57,000 in debt.
That means for every 1/4 point rise in interest rates, it cost an extra $142 to service the debt. Since it’s expected that the FED will raise rates at least 1/4 point during the next 12 months,
it could mean that it costs these households an extra $1,136 to service the same debt that they have now.
For the average family of four that means they’ll lose the ability to buy 10 movie tickets or 2 dinners per month. Or a vacation, a local trip to Disneyland or that bulging basket at Christmas
time.
Ouch.