Interest rate hikes to hit consumers
Posted by | Posted in Business News | Posted on 10-04-2010
NEW YORK, April 11 (UPI) — The U.S. economy is making its first steps toward recovery from the recession, but it will mean the end of cheap credit for American consumers, economists say.
Experts say rising interest rates will be the inevitable result of the country’s ballooning debt and renewed fear of inflation, The New York Times reported Sunday.
After 30 years of decline in the cost of borrowing, the shift will hit consumers hard, financial sector analysts say.
“Americans have assumed the roller coaster goes one way,” Bill Gross of investment firm Pimco said. “It’s been a great thrill as rates descended, but now we face an extended climb.”
The impact of rising rates will hit the housing market first, experts predict.
Thirty-year fixed mortgage rates have risen a half point since December, just as the housing market was beginning to recover from a deep slump, and analysts predict the rise will continue, the Times reported.
“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” Christopher J. Mayer, a professor of finance and economics at Columbia Business School, said. “It’s a really big risk.”
Interest rates on credit cards and on car loans have also begun to increase significantly, the Times said.
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