With the latest interest-rate hike by the Federal Reserve, the average consumer is now facing even greater expenses.
- Mortgage rates are at an all time high, making it especially difficult for first time home buyers to find housing.
- New cars are also becoming more expensive as the rates on loans increase.
- Even with the high interest rates, a more immediate concern for most consumers is the cost of groceries and gas. Consumers may be able to put off buying a new house or car, but groceries can only be delayed for so long. Prices on food have been rising steadily.
It also seems that more Americans are relying on credit cards to make ends meet, The Associated Press reports. Borrowing rates on credit cards have reached the highest numbers since 1996. Interest rates on credit card balances are also higher than consumers are accustomed to, making it harder to pay off the balance.
Why it’s news
When the Fed raises its rates, most other lending institutions respond with higher rates to make up for their own higher costs.
High interest rates mean that any consumer looking to make a large purchase with a loan can expect to pay more in the long run.
Recession worries continue to rise following another increase from the Federal Reserve on Wednesday.
With recession fears come worries about potential layoffs and increased financial hardship for the average household.
Interest rates have reached 4%, marking the highest rates in 14 years. With more hikes likely on the way, homes, auto, groceries, and more will continue to cost consumers more.
Backing up a bit
High rates have begun to take their toll on the housing market as home sales decline.
The continuing decline in home sales is related to climbing mortgage rates. While high mortgage rates are a problem for prospective buyers, the slower market does give them more power to negotiate with sellers.
At the end of October, 30-year mortgage rates were at 7.08%—and the number of people searching “homes for sale” on Google was down 28% from last year, Redfin reports.
Home touring activity, requests for tours, and mortgage applications have also continued to trend down.
If buyers are looking for new vehicles, they’re likely to be met with high interest rates there as well. Annual percentage rates on the typical new car loan reached 5.7% in the last month, according to automotive site Edmunds.
There are fewer budget-friendly options for potential car buyers, especially as general expenses increase.
Prices at the grocery store, for example, are noticeably higher, but that might not be totally due to inflation. Prices for food eaten at home have increased 13%.
When food and beverage companies announced quarterly revenue last month, many reported an increase in profits.
Prices had to go up to cover the costs of inflation, but some businesses may have continued hiking rates in order to create a wider profit margin.