The Fed chose to keep interest rates unchanged at its September meeting, leaving open the possibility of further rate hikes later this year. But many Americans are feeling the effects of rising interest rates. Yahoo Finance’s Rachelle Akuffo explains how.
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video transcript
Rachel Akuffo: Okay. Shifting gears to fight inflation, the Federal Reserve has of course been raising interest rates for more than a year. While this may be what central banks want to keep inflation in check over the long term, rising long-term interest rates are having an impact on households who need to borrow cash in this new environment.
Nearly 60% of households say it’s harder to get a loan now than it was a year ago, according to the New York Fed. Data from LexisNexis Risk Solutions also found that the number of Americans using payday loans and other short-term loans has increased by 35% year over year. Currently, around 1.6 million people have taken out these types of loans for the first time in more than a year, and of course they come with higher interest rates than long-term loans.
And, of course, the real estate market has been hit the hardest. Higher interest rates can result in higher monthly mortgage payments. According to the Atlanta Fed, the median American household needs an income of 43% or more to cover the payments. This is a level Americans haven’t seen since 2006.
