“Americans have had seven weeks to adjust to December’s rate increase and many will be relieved by today’s outcome. Today’s decision to hold rates at 0.5% came as no surprise. December’s rate rise – the first in nine years – was considered a ‘close call’ by some members of the Federal Open Market Committee, and the full effects from the rise are yet to filter through the U.S. economy.”
Comments if Rate is Held, from personal finance expert Fred Schebesta
“Further to this, the current volatility in the global economic market may have influenced the Fed’s decision to hold the cash rate. The economic news coming out of China has not been good – with China’s economic growth at its slowest in 25 years. The Chinese economy hasn’t been in this bad a state since the Tiananmen Square protests of 1989. The Royal Bank of Scotland has predicted a terrible year for investors and recently told clients to ‘sell everything.’”
“William White of the OECD has recently stated that the financial system stress is now ‘worse than 2007.’ Investors will be smiling at this announcement, as the cost of borrowing is unlikely to rise for now. Those who have been surviving on borrowing, however, need to look at alternative sources of finance as further rate rises are likely; it would be a smart move to act now before facing further pressures. However, those with savings may be disappointed with the outcome. Particularly for the older generation or retirees who rely on this interest earned on their savings as a major source of income. The December rate rise may have sparked hope that further rises will follow, but it seems they will have to wait a little longer.”
“Consumers can however put actions in place now to prepare for impending rises – with March or June being slated as possible months we can expect this. For example, borrowers should use this time to make extra repayments where possible to minimize higher costs down the track.”
“It’s important to put December’s rate rise in context – yes, it was a move, but for many Americans, they will go about their day-to-day lives without any major changes. It is however up to consumers to do what they can now to put themselves in the best possible financial situation should rate rises continue – which are predicted. Rather than just assessing your financial position as it stands currently, take into account any future plans – such as buying a property, going on holiday, or upgrading your car – and consider what you can do now to maximize the situation.”
Those looking to break into the property market in 2016 may face a tougher time; with further rises expected this year, very low home loan deals may become less common. You will really need to do your homework and go searching for the best deals out there. A new year means it’s the perfect time to take matters into your own hands and assess your current financial situation. With the recent rate hike, and more expected, now is the perfect time to pull out your paperwork and find out whether your mortgage is actually serving your needs anymore. Check your current interest rate, the features of your loan, and jump online to compare what other similar products are out there – chances are, you will find a better deal. If you’re not willing to switch lenders, demand a better deal from your current one – if they want to keep you, they will have to do better. Simply asking the question could end up saving you thousands of dollars over the life of your loan.
“In the meantime, we can expect more banks and providers to follow the Fed Reserve’s lead in December and raise rates. With further rate rises due to come into effect later this year, impacting some home owners in the U.S., borrowers need to keep on top of their provider’s rates, by reading the fine print and asking questions regarding their loan. In a time of uncertainty and change, you don’t want to overlook the fine details – even a small increase to your interest rate can cost you hundreds, or thousands, of dollars per year.”
Comments if Rate is Increased, from Fred Schebesta
“Americans have had just seven weeks to adjust to December’s rate increase before being hit with another one today – this is likely to cause a lot of worry about the population as the fear of the unknown sets in. Remember, prior to December’s rate rise, it had been nine years without any movements to the cash rate. Today’s rate rise comes as a surprise as the vast majority of economists were not predicting a rate rise until March at earliest or June this year.”
“With increasingly worrisome economic news coming out of China, this is a surprising move by the Federal Reserve.”
“The property market will continue to cool further, with first home buyers and investors hit hardest by this latest rate rise. Savers will be thrilled with this news, as two consecutive rate rises will boost interest earned on savings, something not seen in many years.”
“A new year means it’s the perfect time to take matters into your own hands and assess your current financial situation. Pull out your paperwork and find out whether your mortgage is actually serving your needs anymore. Check your current interest rate, the features of your loan, and jump online to compare what other similar products are out there – chances are, you will find a better deal. If you’re not willing to switch lenders, demand a better deal from your current one – if they want to keep you, they will have to do better. Simply asking the question could end up saving you thousands of dollars over the life of your loan.”
[box]By personal finance expert Fred Schebesta, CEO of consumer comparison site Finder.com[/box]
Photo credit: recombiner via Visualhunt / CC BY-NC-SA
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