09/15/2026
Higher Interest Rates:
Negatives AND Positives.
Interest rates are climbing with the 10-Year hitting a high not seen since 2007. When rates rise - and it is highly likely the FED will raise rates at their next meeting - here are some of the consequences we should be aware of:
1. Mortgage rates will be higher.....but.....this may trigger more pricing flexibility/realistic pricing amongst sellers too that can offset the higher costs of borrowing. Remember, the mortgage payment is ONE of several monthly payments that include real estate taxes, insurance, maintenance, utilities, etc. And there are still many cash buyers out there. Paying in cash becomes even more appealing to some when confronted with higher borrowing costs.
2. Rates are heading higher due to inflationary pressures: inflation remains elevated due to the Iran war, high oil and gas prices, and supply disruptions on top of those triggered by the Russia-Ukraine war that started in 2022. Higher interest rates are designed to slow down inflation....that can be good. When inflation dips, often interest rates follow suit. When inflation dips, prices stop rising, or the pace at which they rise slows.
3. Higher interest rates make almost all borrowing more expensive, which can reduce corporate profits and slow economic growth. Reduced corporate profits can deflate some stock prices. Higher rates make some existing debt payments more expensive, including Federal debt.
4. Higher rates can fuel wealth and income for those with cash... People earn more money on their savings accounts, certificates of deposit, and bonds.
5. Higher rates can strengthen the currency: Higher returns often attract foreign investment, which can make a country's currency stronger.
Like all things, it's always wise to see the global picture, not just one aspect.
Wishing you a TERRIFIC Tuesday!
