![]() ![]() Which consumers are hit hardestįrank Chen, an associate professor in the accounting and finance department at the University of New Haven's School of Business, said any increase in interest rates hits two groups the hardest: Home mortgage holders with adjustable rate mortgages, home buyers who are considering getting that type of loan and individuals with credit cards whose credit scores are at 660 or lower.Ĭhen said home mortgages account for about 70 percent of combined household debt, which makes interest rate increases especially problematic for mortgage holders with adjustable rate home loans.Ĭonsumer interest in adjustable-rate mortgages has been growing since the start of the pandemic in March 2020. So although the interest rate set by the Fed is currently at 4.75 percent, once all those components are added in, Carusone said, a hypothetical interest rate for a consumer could be 7.5 percent or more. "The percentage of loans 30 days past due is closing in on 10 percent," Klepper-Smith said.Ĭarusone said another factor built into the interest rate that consumers are charged is the bank or lender's desire to increase profits "It's designed to reflect the cost of credit, which includes the cost of having enough money to loan, the operating expenses of the lender and the potential for increased risk of consumer loan delinquencies or defaults," Carusone said.ĭonald Klepper-Smith of South Carolina-based DataCore Partners said current data on auto loan delinquencies best illustrate the risk component for lenders. ![]() John Carusone, president of the Bank Analysis Center, a Hartford-based industry consulting firm, said the interest rate the Fed sets is the starting point for how banks and other consumer lenders set the rate that they charge consumers. ![]() As the interest rate increases, consumers see the amount they pay increase. Interest rate hikes increase the cost of borrowing across a wide variety of consumer loan products like credit cards, mortgages and home equity lines of credit as well as auto and school loans. The increase was also the eighth consecutive time the Fed had increased interest rates. The current interest rate is the highest it has been in 15 years. 1, the central bank raised interest rates a quarter of a percentage point to 4.75, where it remains. What is the Federal Reserve's current interest rate?Īt its last meeting on Feb. ![]()
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