ORLANDO, Fla. — Bond yields have risen to levels not seen in about 20 years, and a certified financial planner says consumers should review how higher borrowing costs could affect their credit card payments, home purchases, auto loans and savings.
“It’s the cost of borrowing money,” said Nikki Ward, a certified financial planner with Siler Wealth Management in Longwood.
Ward said borrowing money to buy a home or car, or using a credit card, will likely become more expensive. She said the U.S. Federal Reserve’s recent quarter percentage point rate increase is part of the reason bond rates are higher.
“They’re trying to cool inflation without cooling the economy too much,” Ward said.
Ward said the higher rates have prompted questions from her clients about whether they should make changes to their finances.
“They look to us and say, ‘Should I be doing something, what do I need to be doing?’ And that’s a great question,” Ward said.
Ward’s first recommendation is to pay down credit card debt as much as possible because higher rates can lead to higher credit card interest rates. She said consumers should focus on paying down cards with the highest annual percentage rate first.
“How can we systematically attack that — paying off the highest APR first,” Ward said.
Ward said people shopping for homes should re-evaluate whether they can afford a purchase under current rates, rather than assuming rates will fall later.
“We’re making sure this is a decision that makes financial sense today, and not based off the fact that rates come down tomorrow or in the future,” Ward said.
She said the same approach applies to buying a car.
“And my dad’s looking for a car, so I gave him this advice — shop the financing just as carefully as you’re shopping for the car,” Ward said.
Ward said higher rates also create opportunities for savers. She said people should not feel obligated to keep money at a bank that offers minimal interest on savings accounts.
“Banks are banking on the sense of, well, they’re not going to want the hassle of switching banks,” Ward said. “To me, that is the first area where I would be shopping around.”
Ward said some high-yield savings accounts are paying as much as 4% interest.
“There are high-yield savings accounts that are paying 4%, so the difference between a half a percent and 4% with $50,000 is a thousand dollars,” Ward said. “That’s real money, and the only difference is where that money sat.”
Ward said higher rates do not affect the fixed amount of interest already being paid on homes or cars that have already been purchased.
She also said U.S. Treasury bonds yielding more than 5% interest are more lucrative than they have been in the past and are worth considering as an investment.
Source: mynews13.com
