As interest rates rise, here’s what should be prioritized

Northern California financial adviser John Lockwood joined My58 on Thursday morning to discuss what rising interest rates could mean for your tax future. Watch the full interview in the video player above or read the transcript below. Q: Could you explain what rising interest rates mean for the cost of a credit card balance, car loan or mortgage? Will it be more expensive and by how much and in how long? John Lockwood: The market is changing so quickly and the Fed came out yesterday and raised interest rates by three-quarters of one percent. We’ve seen the 30-year mortgage go up almost half a percent overnight. This morning, I read that the average interest rate for a mortgage loan is 5.87%. This is nearly 2.5% more than at the start of the year. As the Fed’s interest rates go up – what they’re really doing is raising what they call the benchmark – the benchmark is the fed funds rate. It’s the rate at which the banks lend to each other and it really creates a kind of base where the rates just keep going up from there. So think about auto loans, mortgages, credit card rates, they’re all adjusting right now – higher – which means the cost of our debt is going up and that will certainly slow down our overall economic output. Q: Do you advise people to pay off credit card debt and lock in the rate on a car or home loan now? John Lockwood: If you have variable interest rates, we tell our clients to refinance them, to lock them in at a fixed rate because those rates will continue to rise. The Fed has forecast another 1.5% rate hike for the rest of the year. So we can expect all of these floating rate loans to adjust upwards, making debt service more expensive. experts to ensure that these investments in your portfolio are aligned with your goals. If you plan to retire in the short term and essentially convert assets into income, investments should be positioned in a conservative manner or way – in other words – to reduce the risk of the stock market falling. potentially as rates continue to rise. For people with a slightly longer horizon, it’s equally important to remember what the goal is and to make sure investments are aligned with your goal. Q: Are we heading into a recession and do you think we will get to a point where we might reach a depression? John Lockwood: From what I see right now, a recession is imminent. This means that during a recession, the global economy contracts. In other words, production is slowing down. That’s really the essence of what the Fed is doing, raising interest rates to slow the economy. The consequence of this is that we will see the economy go through a recession. Now the question is how long will this last? The Fed will have no incentive to crush the market and plunge us into a deep recession and depression. The Fed is really in a box it has to raise rates high enough to slow down the money supply, slow down demand and that’s really what happens when people spend freely which is great for the economy but it continues to put pressure on prices because the supply is not there. In short, I think we are currently witnessing a short recession followed by medium-term economic growth.| VIDEO BELOW | Fed interest rate hike will make credit card debt more expensive

Northern California financial adviser John Lockwood joined My58 on Thursday morning to discuss what rising interest rates could mean for your tax future.

Watch the full interview in the video player above or read the transcript below.

Q: Could you explain what rising interest rates mean for the cost of a credit card balance, car loan or mortgage? Will it be more expensive and by how much and in how long?

John Lockwood: The market is changing so quickly and the Fed came out yesterday and raised interest rates by three quarters of one percent. We’ve seen the 30-year mortgage go up almost half a percent overnight. This morning, I read that the average interest rate for a mortgage loan is 5.87%. This is nearly 2.5% more than at the start of the year. As the Fed’s interest rates go up – what they’re really doing is raising what they call the benchmark – the benchmark is the fed funds rate. It’s the rate at which the banks lend to each other and it really creates a kind of base where the rates just keep going up from there. So think about car loans, mortgages, credit card rates, they’re all adjusting right now – higher – which means the cost of our debt is going up and that will certainly slow down our overall economic output.

Q: Do you advise people to pay off credit card debt and lock in a car or home loan rate now?

John Lockwood: If you have variable interest rates, we tell our clients to refinance, to lock them in at a fixed rate because those rates will continue to rise. The Fed has forecast another 1.5% rate hike for the rest of the year. So we can expect all these floating rate loans to adjust upwards, making debt service more expensive.

Q: What should people nearing retirement do at this time?

John Lockwood: Right now really is a critical time to snuggle up with your advisor and these experts to make sure those investments in your portfolio are aligned with your goals. If you plan to retire in the short term and essentially convert assets into income, investments should be positioned in a conservative manner or way – in other words – to reduce the risk of the stock market falling. potentially as rates continue to rise. For people with a slightly longer horizon, it’s equally important to remember what the goal is and to make sure investments are aligned with your goal.

Q: Are we heading into a recession and do you think we will get to a point where we might reach a depression?

John Lockwood: From what I see right now, a recession is imminent. This means that during a recession, the global economy contracts. In other words, production is slowing down. That’s really the essence of what the Fed is doing, raising interest rates to slow the economy. The consequence of this is that we will see the economy go through a recession. Now the question is how long will this last? The Fed will have no incentive to crush the market and plunge us into a deep recession and depression. The Fed is really in a box it has to raise rates high enough to slow down the money supply, slow down demand and that’s really what happens when people spend freely which is great for the economy but it continues to put pressure on prices because the supply is not there. In short, I think we are currently witnessing a short recession followed by medium-term economic growth.

| VIDEO BELOW | Fed interest rate hike will make credit card debt more expensive

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