TEMPLE, Texas — Interest rates are certainly on everyone's minds, and anyone looking for a house or a car that they need to finance is certainly realizing how much more expensive it will now be. If you have credit card debt, you certainly know that your monthly payments are higher.
On Tuesday, Aug. 22, the 30-year mortgage interest rate hit its highest mark in 30 years. Home sales slowed in July and now with these much higher rates, certified financial planner Neil Vannoy told 6 News in this week's Money Talks, "Forget about a refinance."
"If you have a fixed mortgage with a low interest rate, you should think twice before paying extra toward the balance," Vannoy said. "High inflation like we've had over the past few years will make the balance less in "real" terms over time."
If you have a low rate on your home already, Vannoy says don't pay more towards principal, you can get a better return somewhere else.
"Instead of paying more toward your mortgage, you might be able to invest the extra money for higher potential returns," said Vannoy. "Over the 5-years ending July 31, inflation averaged just under 4% per year, while the world stock market averaged over 8% per year and the S&P 500 averaged over 12% per year."
Remember, many credit cards or car loans are seeing interest rates, the likes of which many of us have never seen.
"Be careful about taking on new debt in this environment, said Vannoy. "With interest rates so high, the dangers of overspending on things like a new home or new car will compound over time."
In many cities rent is on the rise, but if it's not, consider continuing that lease that you are currently in!
"If you're looking for a place to live, don't assume that buying a house is always better than renting," Vannoy said. "With mortgage rates around 7% and low inventory keeping home prices high, renting might save you thousands of dollars each year. If you invest these savings, you could end up with a higher net worth in the future than you would have had if you had purchased a home."
And remember, there's always a silver lining to higher rates, leave it to the money guy to find it.
"A bright side to higher interest rates is that savers can make more money on their cash," said Vannoy. "There are several high-yield, FDIC-Insured online savings accounts that are paying around 5% per year."
A recent survey found that 70% of Americans have less than $1000 in savings, which marked a significant increase from 2018 when the number stood at 58%.
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