Smart Borrower Blog

Are Interest Rates On The Rise?


Apr 12th, 2010 @ 5:05 AM by Debbie Dragon


According to an article today posted on cnnmoney.com, interest rates could be on the rise. Home loans, car loans and credit cards could start costing more in the very near future. With the economy starting to recover consumers should be thinking ahead and know that their future borrowing needs could become pricier.

During the current economic recession, rates have been lower than many people have ever seen in their lifetime. How have rates managed to stay so low for so long? The highest impact on current lending rates has been determined from the Federal Reserve’s federal fund rate. The rate has been hovering right around 0% since December 2008. The Federal Reserve has kept it low in hopes of boosting the economy through consumer lending. With the economy on the mend, this rate could start to go increase, which in turn will push interest rates on all types of loans upward.

Mortgage rates last week reached an 8 month high according to Freddie Mac‘s weekly survey. They were up to 5.21%. Michael Fratantoni, Mortgage Bankers Association’s Vice President of Research and Economics said, “Throughout most of the last year we were right below or right above 5%, which really is an extremely low rate, historically.”

Mortgage rates are expected to continue upward for the remainder of the year, reaching close to 6% by year’s end.

Credit card interest rates have already started to see a steady incline. This has been in part due to the increased risk credit card lenders take when the economy is suffering. The rates are projected to continue their upward trend according to Ben Woolsey an analyst at creditcards.com. In regards to credit card interest rates he says, “It’s going to keep edging upward a bit, because credit losses aren’t going to improve for the banks until unemployment heads down.”

While consumers should expect auto loans to increase again at some point in the future, we won’t be as likely to see them go up soon or at a fast pace. In 2007 auto loans hovered around 7% and today they average under 4.5%.

Loans have managed to stay low as more people are choosing to keep their current automobiles longer and money available for car loans is not being lent fast enough. Current automobile promotions could stick around for some time to come, just depending on how quickly the demand for new cars goes up.

About Debbie Dragon
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.

One Response to “Are Interest Rates On The Rise?”

  1. Mike Dungen says:

    Interest rates have indeed started an upward trend: Historical data shows that interest rates have a cycle of high and low which repeats itself roughly every 4 years.

    This is a good rule of thumb when trying to estimate the duration of the current trend.

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