Financial advisor discusses rising interest rates

The Federal Reserve raised interest rates last week in order to get a handle on inflation. (Source: WSFA 12 News)
Published: May. 10, 2022 at 7:50 PM CDT
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MONTGOMERY, Ala. (WSFA) - The Federal Reserve raised interest rates by a half-percentage point last week in order to get a handle on the worst inflation the United States has seen in 40 years. It’s the second hike in two months and the largest increase since 2000.

“A 50-point bump that we just had is one of the highest ones we’ve had in the past two decades. It’s usually a quarter-percent up, a quarter-percent down. So that can come as a little bit of a shock to folks,” said Marc Hall, a financial advisor with Ariss Financial Group. “Right now, the underlying fundamentals of the economy of the stock market are not that bad. We’re seeing good earnings, we’re seeing good growth. It’s just this pressure right now of stuff costing more. We’re paying for the lockdowns of the last couple of years.”

So what does the interest rate increase mean for your pocketbook? Hall says your financing cost are going to continue to rise. Borrowing money will become more expensive with higher interest payments for car loans and credit card bills.

“Interest rates are going to go up even more over the next little while. So you have to be careful about 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 review and see are there ways to consolidate that. Because you’re going to be paying more for those in the in the short term,” said Hall.

Within a billing cycle or two your annual percentage rate, or APR, will increase. Home equity lines of credit are also adjusted upward right away.

“Your chance to refinance or things like that are probably in the rearview mirror for right now. You don’t want to do that because interest rates for home mortgages in the last six months have gone from around 3% for a 30-year interest rate to around five and a half,” said Hall. “That’s a huge difference in the amount of money that you pay over time. So if you’re looking for new home, that’s where the problem may come in as far as maybe a home that you could afford the mortgage on a few months ago, maybe a little bit more out of hands now than it was.”

Investors are worried about high inflation and rising interest rates from the Federal Reserve. It has been a bumpy ride on Wall Street lately, but Hall says if you have money invested in stocks now is not the time to make major overhauls.

“When it all hits at one time, it can get really scary when you see a lot of red on the screen over a few days. But what I am talking on the phone with clients every day and in personal clients every day is stay true to your long-term plans because we knew stuff like this was going to happen. But we’re looking at how does this affect. us 10, 15, 30 years down the road. Don’t make rash decisions based on emotion. That’s where you get the trouble,” said Hall.

Hall advises people to consult with a financial adviser who can best guide them and help them plan for the future.

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