Find out how rising interest rates affect bond prices, home mortgage rates and more. To protect your money, learn more about what to watch when interest rates go up:
Increases in the Interest Rates on Variable-Rate Loans
A borrower who has a loan with a variable prime rate, also known as an adjustable rate loan, will have to pay more each month as interest rates rise.
The interest on a loan with a variable rate can quickly increase, unlike the fixed rate on which you can plan. LendingTree's chief credit analyst, Matt Schulz, warns that the consequences "can be really huge" in the long run. Mortgage, credit card, and auto loan interest can easily run into the thousands over time.
Converting a variable-rate loan into a fixed-rate loan or paying off a variable-rate loan early can be a prudent move when interest rates are expected to rise.
Decreased Bond Prices
When interest rates increase, bond prices typically decline. Fed Chair Jerome Powell announced in May 2022 that the Fed would begin selling off some of its $9 trillion in Treasury bonds and mortgage-backed securities in June of that year in order to reduce market liquidity.
However, the yields on both short- and long-term U.S. Treasury bonds are currently higher now than they were a year or a month ago. Think about whether your investment approach needs to be modified.
Increases in the Interest Rates on Variable-Rate Loans
A borrower who has a loan with a variable prime rate, also known as an adjustable rate loan, will have to pay more each month as interest rates rise.
The interest on a loan with a variable rate can quickly increase, unlike the fixed rate on which you can plan. LendingTree's chief credit analyst, Matt Schulz, warns that the consequences "can be really huge" in the long run. Mortgage, credit card, and auto loan interest can easily run into the thousands over time.
Converting a variable-rate loan into a fixed-rate loan or paying off a variable-rate loan early can be a prudent move when interest rates are expected to rise.
Decreased Bond Prices
When interest rates increase, bond prices typically decline. Fed Chair Jerome Powell announced in May 2022 that the Fed would begin selling off some of its $9 trillion in Treasury bonds and mortgage-backed securities in June of that year in order to reduce market liquidity.
However, the yields on both short- and long-term U.S. Treasury bonds are currently higher now than they were a year or a month ago. Think about whether your investment approach needs to be modified.
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