The Federal Reserve Board recently announced it will help to keep interest rates at artificially low levels for the foreseeable future, but many experts note that they could be slated to rise at some point in 2014. However, it’s important to note that this will probably not alter what borrowers pay for certain types of consumer credit.
The federal government’s stimulus efforts will likely come to an end relatively soon, and many experts believe that well before 2015, these bond-buying plans will be brought to a halt, according to Bloomberg News. However, credit cards and auto loans will likely not be effected by the change because they are not tied to the same yields as mortgages tend to be. Instead, they are related to the target federal funds rate, which will remain at extremely low levels until 2015.
“From here on out we’re going to see interest rates go up, and not so gradually on the mortgage rate,” Barry Bosworth, an economist at the Washington-based research group the Brookings Institution, told the news agency. “That’s not a small thing for consumers. They have benefited a lot as borrowers on the lower rate of interest.”
Already, interest rates on mortgages have begun what some believe will be a slow climb back to more historically average levels after hovering at or near all-time lows for more than a year, the report said. However, it’s important to note that even as they continue to rise, rates on home loans are still extremely affordable, particularly when compared to those many current homeowners are already paying. As they continue to rise, though, fewer current homeowners will take advantage of refinances.
But where credit cards are concerned, rates are likely to remain relatively flat, the report said. Even as the Fed doesn’t move the prime rate upward from the level it has maintained for years, analysts generally do not predict that they will be moved downward either. Experts say those with variable-rate credit cards, meanwhile, might want to deal with their ongoing debts in a more comprehensive manner because these could see a slight uptick in APRs in the near future.
In general, consumers have been trying to keep their debts down in the last few years anyway, but there has been a steady increase in borrowing more recently. While this has not brought balances anywhere near the levels seen prior to the economic downturn, those hoping to avoid interest charges and other such concerns may want to avoid heavy borrowing.