Interest Rates Rising? What That Means for You

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WASHINGTON - As the U.S. economy struggles to regain its footing, financial experts are predicting higher interest rates are on the way.

Such an occurrence would mean higher rates for mortgages, car payments and other loans. Still, for some people, that might be good news.

Although America's economy is starting to grow again, the industry at the center of the economic bust continues to struggle.

Interest Rates and Housing

"We have yet to see evidence of a sustained recovery in the housing market," Federal Reserve Chairmain Ben Bernanke said.

Now, there's talk of raising interest rates.

Thomas Hoenig, president of the Kansas City Federal Reserve Bank, said the Fed should start raising rates soon. He warns leaving them near zero increases the risk of inflation.

But since other members of the Fed may not agree, it may be a while before the Fed starts to hike short-term rates.

In the meantime, longer-term rates have already been climbing and Americans will definitely feel the difference.

People taking out loans for cars and houses will get less bang for their borrowed buck. The reasoning is that for every percentage point interest rates rise, a buyer's purchasing power is reduced by approximately 10 percent.

According to the Association of Realtors, $300,000 to $400,000 would-be buyers are priced out of the market in a given year.

Impact on Uncle Sam

However, the good news is that people who save money will earn a little more interest on their savings accounts and other investments like CDs.

Meanwhile, higher interest rates will also have an impact on the biggest borrower of all: the federal government.

Paying off the interest on those huge federal deficits could get more and more expensive in the years ahead.

By some estimates, the interest costs alone will reach $840 billion by the year 2020.

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CBN News
Jennifer Wishon

Jennifer Wishon

CBN News White House Correspondent

Jennifer Wishon is the White House correspondent for CBN News based in the network’s Washington, D.C. Bureau.  Before taking over the White House beat, Jennifer covered Capitol Hill and other national news, from the economy to the 2010 oil spill in the Gulf of Mexico. Follow Jennifer on Twitter @JenniferWishon and "like" her at