Rising Interest Rates | Most of us have experienced a variety of economies, from inflationary to close -approaching something which resembles a recession.
Since we can't predict the future (at least not accurately), doesn't it make sense to be as – informed, as possible, to proceed as logically as possible?
How these economic conditions and rising interest rates might impact essential components, such as real estate/ housing, the stock market, the performance of bonds, and bank interest rates, is often significant.
Therefore, it is usually wise to proceed as an informed individual! With that in mind, this article will attempt to briefly consider, examine, review, and discuss three specific areas of how overall conditions may influence them.
RELATED: Inflation on the Rise for Big Ticket Items. The Worse Levels Since 1982
Insanely Rising Interest Rates Now and Economic Impacts Of Inflation: 3 Specific Areas
1. Real estate/ Housing: Rising interest rates and how might inflation influence the real estate markets regarding pricing, availability, affordability, and whether we witness buyers, sellers, or neutral markets?
At present, we are experiencing the cost of new housing rising quickly, mainly because the prices related to many building supplies, especially lumber, etc., have increased at a pace we have not seen before in recent memory!
New home prices with rising interest rates, therefore, have significantly increased in costs/fees, and, to – date, it has slowed the rate of sales in these properties.
In recent times, mortgage rates have remained at, and near, record – low rates, mainly because, of a continued period, of the Federal Reserve Bank maintaining meager rates of borrowing funds!
The combination of the prolonged, horrific pandemic, cheap – money (creating extremely affordable mortgages), and related lifestyle changes, etc., have caused a significant increase in the costs of buying a house.
If/ when rates rise, how might that impact home buying, etc.? It is wise to recognize how various economic conditions affect many components of our economy!
2. Stock market: We have witnessed a rising stock market for the last few years. Nearly every index has improved and benefited, from the prolonged low interest rates, which means stocks have increased, in popularity, as an investment vehicle, mainly because they are the only – game – in – town.
With interest rates so low, alternatives, such as bonds, and bank accounts, pay very little! The probability is, when rates rise, as they will. Eventually, it will hurt stock prices/ popularity!
3. Bonds and banks: While low rates translate – to what is called cheap – money for those borrowing funds, when this rises, the costs to borrow will increase, and the rates provided on these types of accounts will grow!
The more – informed one is, the better – off he probably becomes, especially in changing times! Will you commit to being a wiser consumer, etc.?