Navigating Rising Interest Rates

February 22, 2023

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Rising interest rates can be both an opportunity and a challenge for your finances. If you have money in savings and are looking for a better interest rate, you will find rates unheard of just a few years ago. However, if you need to borrow money to purchase a car or home or to get to the end of the month, higher monthly payments may limit what you can borrow. With interest rates continuing to rise, it's worth reviewing how they affect your finances.

Much of the conversation about interest rates has focused on savings and deposits. To be sure, rising interest rates can be excellent if you are nearing retirement. Retirees, or others saving for short-term goals, use certificates to earn interest on their funds. Many financial institutions have recently offered consumers higher rates and specials, and Heritage South Community Credit Union is no exception. "We are monitoring the economy and interest rates daily," reported Heritage South CEO Laura Parham. "We want to ensure we offer a competitive rate to our members, but things are changing very quickly." You might be tempted to move your money to the latest special if you have funds currently in certificates, but before doing so, always check to see if there is a penalty for an early withdrawal from your current account. 

But what if you need to borrow money right now? Does this mean you should delay purchasing that new car or home? While today's interest rates are the highest in 20 years, they are not outside historical norms. "Historically low interest rates have spoiled us for many years," Mrs. Parham said. "We don't see rates returning to where they were anytime soon. So members looking to buy a new car shouldn't delay just because of interest rates." Regardless of market conditions, the right time to buy a house or car is when you feel ready and when your credit and financial foundation are healthy.

Buyers, however, will need to consider how much they can afford to borrow. A higher rate means paying more interest over the loan's lifetime and less buying power from the beginning. To put this in perspective, if you can only afford a mortgage payment of $1,500, the maximum home price you can consider decreases because more of your monthly payment goes towards interest. If you were preapproved for a mortgage several months ago and have yet to find your home, you should contact your lender to see how your situation has changed.

One additional step consumers can take right now is to examine their existing debt payments. Future interest rate hikes won't affect a fixed-rate car loan you may have, and the same goes for fixed-rate mortgages. However, if you carry a balance on a credit card or have another loan with an adjustable rate, the rate you owe on that money will continue to rise. It is best to pay down this debt. If you cannot pay down your debt quickly, consider options for refinancing, such as a debt consolidation loan or transferring a credit card balance to a card with a lower rate. 

Heritage South Community Credit Union is a community-chartered credit union headquartered in Shelbyville. Membership is open to anyone who lives, works, worships, or attends school in Bedford, Marshall, Rutherford, Cannon, or Maury counties or the cities of Tullahoma, Manchester, Winchester, Decherd, or Fayetteville. To learn more about Heritage South, visit or call 931-680-1400. This credit union is federally insured by the NCUA and is an Equal Housing Lender.