Rising interest rates, good or bad?

lavanay · Congressional Page Joined: 20 Jun 2006 Posts: 16

US Federal Reserve Bank raised interest rate on US Government Treasuries to 5% and gave indications of further increases in near future. Please share your views if this will be good for US economy?

Dolly · Mayor Joined: 17 Jun 2006 Posts: 247

I posted elsewhere on the forum today Lavanay, that the talk is of them rising to 6%.

I can't see it not hitting the housing market, which will effect people who bought within the last few years or got involved with Mortgage Equity Withdrawal (it must be called something different on your side of the pond), but it could make paying back difficult and, if house prices fall, then recent buyers could be in negative equity.

It will also depend on what your wages and inflation are doing as well. Inflation rising can be a good thing because without it you never erode your debt.

adam_t · Congressional Page Joined: 25 Oct 2006 Posts: 2

Atlast Federal Reserve Bank has stopped raising the interest rates and it may actually start reducing them by march next year.

TheFrugalPlace · Posted: Fri Oct 27, 2006 9:04 am Post subject:

Good if you have no debt and investments - bad if you have debt...

In my life it's a negative though I have relatives who find they are now making more money with the higher interest on investments.

julian4239 · Mayor Joined: 07 Jun 2006 Posts: 211

You have to look at this in the long run. It's good for the economy so that we're never exposed to rapid inflation. However, in the short run, it profoundly affects interest-sensitive stocks like utilities and housing sector.