Financial plans should not change as a result of interest rates, advisers say – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Newswires
Topics
    • Life Insurance News
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Articles
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
Sign in or register to be an INNsider.
  • Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
  • Insider Pro
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
Advisor News
Newswires RSS Get our newsletter
Order Prints
August 1, 2022 Newswires No comments
Share
Share
Tweet
Email

Financial plans should not change as a result of interest rates, advisers say

Observer-Reporter (Washington, PA)

The Federal Reserve tossed a bucket of ice water on the economy this week by boosting its benchmark interest rate from 2.25% to 2.5% in an effort to bring runaway inflation under control.

This increase, combined with another 0.75% increase just weeks ago, are the largest rate hikes in years, and are a marked contrast to interest rates in the depths of the COVID-19 pandemic, when they were kept near zero. It has led many investors and everyday consumers to wonder how they should proceed in a volatile environment.

Should they purchase a new house, or get a new set of wheels? Or should they wait a while in the hope that interest rates – and, hopefully, prices – will come back to earth?

Related stories

  • Some major REITs limiting cash-out requests from investors
  • Four stages of retirement planning

"If you find the home you like, or the car you want, you should go forward," according to Don Detts Jr., a certified financial planner with Wells Fargo Advisors in Southpointe.

Sara Botkin of Botkin Family Wealth Management in Peters Township agrees: "Don't allow these things to derail your long-term financial plans."

Detts and other financial advisers in the region pointed out that even though interest rates on a 30-year, fixed-rate mortgage are now at 5.54%, a little more than double what they were a year ago, rates are still well below what they were 40 years ago, when the Federal Reserve broke the back of inflation with punishing rate hikes. In those days, interest on fixed-rate mortgages could run as high as 13%.

"They're getting closer to normal," said Gary Boatman of Boatman Wealth Management in Monessen. "They've been low for so long."

On the other hand, homeowners who have adjustable-rate mortgages or lines of home equity credit will end up paying more due to the rate increases. Federal Reserve chair Jerome Powell hinted that another increase could be coming in September.

Rob Vettorel, a financial adviser with Washington Financial, pointed out that if you are looking to purchase a home now, and then sell it in three to five years, then you might not be able to make back your investment. But if you plan on staying in the home for several years, then you should be OK.

The interest rate on federal student loans are also fixed, so holders of outstanding loans will not see their rates go up. However, anyone who takes out a new loan will see a higher rate compared to what has been available in recent years.

No matter the season, financial planners also advise against carrying large amounts of credit card debt, and those rates will also be heading upward as a result of the interest rate increases. Those rates now average between 15% and 19%, and the amount of interest companies charge should be increasing within the next couple of billing cycles. According to Botkin, "We've always advised clients to carry low debt loads."

In contrast, the interest rate on savings has been abysmal over the last couple of years, and the Fed's rate increase will likely not immediately improve the outlook for anyone who has a lot of money stashed in the bank. Vettorel pointed out that banks are sitting on piles of cash and interest rates on savings go up when banks want deposits.

In the near-term, rising interest rates are expected to cause some pain, whether in the form of a higher unemployment rate or increased borrowing costs. A recession is also a distinct possibility, but Botkin believes it's a price that we might need to pay to tame inflation.

"If a recession is what it takes, then so be it," she said.

Older

Worst of economic storm is still to come

Newer

Biden poised to deliver on decades-long Democratic promise on drug prices

Advisor News

  • Some major REITs limiting cash-out requests from investors
  • Four stages of retirement planning
  • Can you work while on Social Security?
  • Even on $100K-plus, more Americans are living paycheck-to-paycheck
  • Opinion: the state wealth-tax alliance
More Advisor News

Annuity News

  • Sweet streams of income: ChatGPT, the bard of annuities
  • F&G Annuities & Life announces equity investment in life IMO SYNCIS
  • Investors scrambling to lock in rates propel annuity sales to record highs
  • North American and Annexus launch new fixed index annuity
  • Producers stew as insurers slow to process life and annuity applications
More Annuity News

Health/Employee Benefits News

  • Medicaid coverage is expiring for millions of Americans – but there's a proven way to keep many of them insured
  • Health savings account balances increase in 2021
  • Outcome Health trial gets underway with prosecutors alleging former execs were involved in $1 billion fraud scheme
  • Bill incentivizing gun owners to secure firearms addresses public health concern
  • With CalPERS, add another to list of California's botched projects
More Health/Employee Benefits News

Life Insurance News

  • NAIFA’s Future Leaders Program offers free sessions for students
  • Scott Boutin named president of Standard Security Life
  • Agent insists Alex Murdaugh suggested he killed his son
  • 78% of families suffer financially handling estate affairs
  • National Life expands living benefits suite
Sponsor
More Life Insurance News
The time is 06:39:04am test

- Presented By -

Top Read Stories

  • Investors scrambling to lock in rates propel annuity sales to record highs
  • Chicago news roundup: PPP fraud uncovered in Chicago, informant reveals $100K bounty on FBG Duck and more
  • For some, nothing to fear from taking RMDs, professor says
  • Study: Education level should drive decisions on Social Security, annuities
  • North Carolina businessman pleads guilty in multi-million tax fraud case
More Top Read Stories >

FEATURED OFFERS

Meet Encova Life
We know agents matter. You can count on our life team to be high tech, high touch and responsive.

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Articles
  • Monthly Focus

Top Sections

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2023 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.