Jul 30, 2022 / Money Tips

What Do Rising Interest Rates Mean for You?

Interest rates are rising and the sky is falling! Okay, it’s not all doom and gloom. Yes, the Federal Reserve recently raised rates. And yes, more increases may be coming, but there are both good and bad things about rising rates, and it all impacts you, the consumer.

Here is a brief primer about the real-life ramifications of rising interest rates—including a quick tutorial about benchmark rates—and a few ways Utah First is helping you get the upper hand on the changing market.


Understanding Interest Rates

The Federal Reserve, often called “the Fed,” is the central bank of the United States. As such, it is responsible for keeping the very foundations of our financial system stable by avoiding extremes in the economy, which can lead to inflation or recession.

One way to keep this happy economic medium is by adjusting interest rates, or more specifically, the federal funds rate. The federal funds rate is the interest rate at which banks lend money to other banks. It also serves as the basis for the prime rate—the benchmark interest rate that most financial institutions use to establish rates given to consumers.

In other words, when the Fed adjusts the federal funds rate, other financial institutions follow and adjust their interest rates in step. When rates go up, borrowing money becomes more expensive for consumers across the board, from credit cards to mortgages, and every loan in between.

All of this means that borrowing money will be more expensive. Variable interest rates and the price of new loans are rising, making both monthly payments and principal loan amounts more expensive. If you carry a balance on a variable interest rate credit card, you’ve probably noticed that your payments are more expensive than they were just a few months ago. As for fixed rates, your existing loan rates are locked in, but any new loans will carry a higher rate moving forward.


Combatting Inflation

The good news is that rising rates may reel in recent inflation in the market. Inflation happens when there is too much demand for too little supply. Anyone familiar with the Utah housing market can attest to supply and demand discrepancies causing housing prices to rise in an unprecedented way in recent months.

The Fed hopes that raising interest rates will cause a cooling effect on the market and that fewer buyers will compete for available supply, bringing supply and demand into better balance. Recent reports suggest it may be working, as inflation and rising rates have combined to drop demand for mortgages to a new 22-year low.


Helping You Outsmart the Market

At Utah First, we’re here to help you beat rising rates. In fact, we’ve designed our loan products to help our members get an upper hand on the market. We’re doing this in a few ways, specifically through our credit card, term deposit, and home equity line of credit (HELOC) products.

  • Credit Card: As interest rates rise, a fixed rate credit card becomes even more valuable. Our Orange Platinum Visa is the rare example of a credit card that’s not subject to variable (rising) rates. Once you have your card, your rate will never change, even as market conditions cause other rates to fluctuate.
  • Term Deposit: As inflation and rising rates cause unpredictability in the stock market and other investments, we’re giving you a safe place to grow your money with 2% guaranteed increase over 20 months. That’s double the earnings of the average market rate for term deposits and 20-times the growth of the average savings account.
  • HELOC: As borrowing becomes more expensive, we’re giving members a 2% intro rate for six months when they open a new HELOC account. It’s an affordable way to upgrade your home, plan a big event, tackle your summer to-dos, and take advantage of the extra equity in your home.

Rates are rising, but you can take control of your financial destiny with a little knowledge and some help from Utah First. To learn more about Orange Platinum Visa, our term deposit, and home equity line of credit, call, contact, or come chat with one of our helpful financial experts.