Interest Rates are Expected to Rise

27 04 2010

Although the recession on the whole has had a negative effect on consumers, the low interest rates have proved to be a silver lining. As mentioned in previous posts, it does seem that the economic condition is getting better in the United States. It seems that interest rates, and their impending rise, is something to be mindful of next though.

The rise can already be seen in 30-year fixed rate mortgages, which were 5.31% last week, an 18-month high.

Why is this important? If you are looking to buy a home, unless you can buy it all cash, you will be buying the home with a mortgage. As you pay off the mortgage, you must also pay off the interest… the higher the interest, the more you pay in the long run.

For example, if you have a 30-year 4.9% fixed rate mortgage on $100,000, you will actually pay $191,061 in 30 years. That same mortgage with a 5.9% interest rate will be $213,529. That is a 10.5% difference.

What other rates will be affected? Credit Cards, and Car Loan rates are also expected to rise, but on the plus-side for investors, the interest rates for Government issued Treasury notes will also be increasing.




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