[The Epoch Times, June 18, 2022](The Epoch Times reporter Wang Xiang comprehensive report) The Federal Reserve announced on Wednesday (June 15) that it would raise interest rates by 3. The annual interest rate of credit cards soared to 20% within a week, and the annual interest rate of mortgage loans was also close to 6%. Some users complained about skyrocketing interest rates, saying they were “deducted to death”.
In order to curb the highest inflation rate in 40 years, the Federal Reserve has started a new round of sharp interest rate hike cycle, and it is expected that it will take several months for the social economy to fully digest the signal. But for the millions of people who rely on loans today to pay their bills, attend college, buy a home or expand their business, the impact of the rate hikes has been immediate.
The Federal Reserve raised the federal funds rate this week to the highest level since 1994, which is expected to affect the debt benchmarks of consumers and companies large and small in everyday life. Mortgage rates have soared to their highest levels since 1987, and the rate on a 30-year loan has risen to 5.78%, nearly doubling in a year.
As economists debate whether or when the Fed’s fight against inflation will lead to a recession, financial hardship has become a reality for consumers facing rising food and gasoline prices.
High interest rates, on the other hand, will make it more expensive for companies to invest and could mean layoffs in the future — even though unemployment is still historically low and layoffs are mostly limited to industries such as housing, internet and technology.
Credit card overdraft bills pile up
With inflation taking an ever-increasing impact on household budgets, some consumers are starting to overdraft their credit cards. Credit card interest rates are currently around 16.61%, and after the rate hike, credit card interest rates have risen to 20% this week, a new all-time high.
Sara Rathner, a credit card expert at personal finance firm NerdWallet, warns that as interest rates rise and the price of everything continues to rise, it is likely that more people will not be able to pay their credit card bills.
Annie Brucato, a 67-year-old retiree in Milltown, N.J., said her bills were rising — for everything from electricity to cable, Bloomberg reported. She is taking out a personal loan and a summer job with flexible hours to help make ends meet. She has accumulated about $6,000 in debt on her credit card bills.
“No matter how much I paid, the bills kept piling up,” she said. “I felt like every time there was a little improvement, I would be charged to death.”
Ted Rossman, senior industry analyst at CreditCards.com, recommends that if you have credit card balances, try a lower-interest home equity loan or personal loan to consolidate and pay off a higher-interest credit card, or switch into an interest-free balance transfer credit card.
mortgageInterest rates doubling a year discourage homebuyers
Higher mortgage rates have complicated the housing market, with recent data showing a slowdown in demand in hotspots.
One of the goals of Fed officials also includes cooling the housing market. Federal Reserve Chairman Jerome Powell on Wednesday advised people looking to buy a home to think twice.
For the week ended June 9, the average rate on a 30-year fixed-rate mortgage was 5.23%. The rate was below 3% in the same period last year. The average rate on a 30-year fixed-rate mortgage rose to 5.78% after the Fed raised rates this week.
Higher mortgage rates are making it harder to afford a home, especially since home prices have just been skyrocketing during the pandemic. According to the National Association of Realtors, the median price of an existing home sold in April surged 15% year over year to around $390,000.
Homeowners who have already signed up for 15- and 30-year fixed-rate mortgages won’t be immediately affected by the rate hike.
Activists rallied outside the Fed’s headquarters earlier this week, hoping to remind officials that the tightening they’re planning is coming at a human cost.
The labor market remains exceptionally tight, with unemployment hovering near 50-year lows and job openings nearly double the number of unemployed.
But some cracks are emerging. On a moving average basis, unemployment insurance claims have risen in nine of the past 10 weeks.
Erica Groshen, a former Bureau of Labor Statistics director, said: “The worst case scenario is that companies lay off workers, those companies that were planning to expand don’t expand, and then everyone loses faith[in the economy]and we into a downward spiral of recession.”
Responsible editor: Li Yuan#