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How Rising Interest Rates & High Inflation Affect You

For the first time since the 1980s, rising interest rates and inflation are front-page news. For many of us, this impact one’s financial quality of life immediately. Some may have to choose between their usual comforts as they become increasingly expensive. Maggi Tax shares how rising inflation rates and inflation could affect you and how to prepare for it.

Last year, we experienced massive inflation for the first time in decades. Consumer prices spiked 2.6% in March 2021 and just recently, the 10-year Treasury yield hit 1.75%. These numbers in hyperbolic headlines may seem scary but here’s some perspective on the growing inflation. Inflation and interest rates had been so low for so long that any pickup in demand for services and goods rose faster than the supply. Adding to that pressure, the COVID-19 pandemic supply chain issues affected many businesses dependent on manufactured materials. In an attempt to meet the growing demand, businesses had to expend time, money, and resources to find alternative materials solutions.

This is where you might have felt an impact. Rising prices eat into bonds’ fixed interest payments, creating increased yield when sold. Long-term yields are another area to keep an eye on. These are used as a benchmark by mortgage lenders. When the yields rise, this creates market volatility and causes lenders to raise the rate that they charge borrowers. These increased rates can affect both monthly and total loan payments over a loan’s lifetime.

Though many economists cannot agree on when the inflation period will end, it is tied to supply chain issues and a few other assumptions. When manufacturers can meet the higher consumer demand for products and the world can return to normalcy in a post-COVID-19 world, rates can start decreasing to recover.

Working with a trusted financial advisor can help you make the right decisions for your financial situation. By better understanding the impact of buying versus waiting, how a mortgage can fit within your budget, or even how payments can affect your financial goals. Contact us here or call (727) 799-1701 to schedule your appointment today.

 

 

 

 

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