Unaffordable Utah: How to prepare for interest rate hikes

Feb 7, 2022, 10:57 PM | Updated: Jun 13, 2022, 4:01 pm

SALT LAKE CITY – With high inflation sticking around, a series of possible interest rate hikes could help bring higher prices under control but also gradually increase the cost of borrowing money.

“Right now, the market is predicting four rate hikes this year,” said Rich Mebius, Zions Bank’s wealth management portfolio manager.

Mebius said the first rate increase from the Federal Reserve could come in March. The news comes as rising prices are causing concern across Utah, from the grocery store to the state Capitol.

“One of the greatest challenges Utah families are experiencing today is the booming tax of inflation, which just recently hit rates not seen since 1982,” Gov. Spencer Cox said in his recent State of the State address.

“I’m trying to be prepared because I think things are not going to get better for a while,” said Cottonwood Heights resident Cindi Peckham.

In late January, the Federal Open Market Committee indicated that interest rate hikes are on the horizon, but did not provide a timeline.

Federal Reserve plans to raise interest rates as soon as March to cool inflation

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” said a statement issued Jan. 26.

“The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments,” the statement went on to say.

More than a week after that meeting, the monthly jobs report showed the country added a better-than-expected 467,000 jobs in January, according to the U.S. Bureau of Labor Statistics.

“The economy looks good and we’re moving ahead and that’s the reason why we’re raising rates,” he said.

US economy grew 5.7% in 2021 in rebound from 2020 recession

Mebius said Utah families can prepare now for possible interest hikes.

“As consumers, we’ve become really accustomed to low-interest rate loans,” Mebius said.

First, lock in a low rate for any purchase you’re planning where you will be borrowing money.

“If you’re thinking about making a purchase, you’re probably going to want to do that sooner than later because we know that rates are moving higher.” Mebius said.

That includes your home loan. Utah homeowners could benefit from higher home values and should consider refinancing if they haven’t done so in the last two to three years, Mebius explained.

“Looking at refinancing is going to be really important,” Mebius said.

To save money down the road, also compare auto loans to make sure you have the lowest rate possible, and then tackle that credit card debt or transfer/consolidate balances to obtain a lower rate.

Next, look at your retirement and investment accounts.

“Having a well-diversified portfolio with an appropriate mix of stocks and bonds,” Mebius said.

It’s also a good idea to revisit your household budget and look ahead to other changes that could impact your family’s finances.

“Eventually, student loan payments will come back, so those are some things that consumers are going to have to start making some hard decisions about what’s necessary,” Mebius said.

One silver lining to any future rate hikes: you could earn more interest on your savings account, so shop around for the best rate.

“There’s a lot more uncertainty now, and so being a little bit more prepared is more important than it has been,” Mebius said.

Despite the uncertainty, Mebius reminds that the economy is strong, with Utah leading the pack.

“We don’t want to paint this picture of doom and gloom because there is a lot of good and positive things happening here; we just have to work through a transitionary period,” Mebius said.

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