As interest rates rise here’s what should be prioritized


Northern California Financial Advisor John Lockwood joined My58 Thursday morning to explain what rising interest rates could mean for your fiscal future.Watch the full interview in the video player above, or read the transcript below. Q: Could you explain what rising interest rates mean for the cost of carrying a credit card balance, car loan or mortgage? Will it be more expensive and by how much and how soon?John Lockwood: The market changes so rapidly and the Fed came out yesterday and raised interest rates three-quarters of one percent. We saw the 30-year mortgage increase by nearly half of one percent just overnight. This morning I’m reading that the average interest rate on a mortgage rate is 5.87 percent. That is up nearly 2.5% from earlier this year. As interest rates increase from the Fed – what they’re really doing is increasing what they call the benchmark – the benchmark is the federal fund rate. That’s the rate at which banks loan to each other and that really creates a type of base where rates continue to rise from there. So think about auto-loan, mortgages, credit card rates they’re all adjusting as we speak — higher — which means the cost of our debt is increasing and that will certainly slow down our overall economic production.Q: Do you advise people to pay off credit card debt and lock in the rate for a car or home loan now?John Lockwood: If you have variable interest rates we are telling our clients to re-finance, lock those into a fixed rate because those rates will continue to rise. The Fed has forecasted another 1.5% rate increase throughout the rest of this year. So we can expect all of those variable rate loans to adjust higher making the debt service more expensive.Q: What should people who are nearing retirement do right now?John Lockwood: Right now is a real critical time to huddle with your advisor and those experts to make sure that those investments in your portfolio are aligned to your goals. If you’re looking to retire in the near term and essentially convert the assets into income then the investments need to be positioned in a way or conservative manner – in other words – to reduce the risk of the stock market potentially going lower as rates continue to rise. For folks who have a little longer of a horizon, it’s equally important to remember what is the goal and ensure that the investments are in alignment with your goal.Q: Are we headed toward a recession and do you think we’d get to a point where we could reach a depression?John Lockwood: Based on what I’m seeing right now a recession is imminent. Meaning that, in a recession, the global economy is shrinking. Meaning that production is slowing down. Really that is the essence of what the Fed is doing, raising interest rates to slow down the economy. The consequence of that is that we’re going to see the economy go through a recession. Now the question is how long is that going to last? The Fed is not going to be incentivized to crash the market and put us into a deep recession and a depression. The Fed is really in a box, they have to raise the rates high enough to slow down the money supply, slow down the demand and that’s really what’s happening when folks are spending freely, which is great for the economy but it continues to put pressure on prices because the supply isn’t there. Long story short, I think what we’re seeing now is a short recession followed by economic growth in the midterm.| VIDEO BELOW | Fed interest rate hike will make credit card debt more expensive

Northern California Financial Advisor John Lockwood joined My58 Thursday morning to explain what rising interest rates could mean for your fiscal future.

Watch the full interview in the video player above, or read the transcript below.

Q: Could you explain what rising interest rates mean for the cost of carrying a credit card balance, car loan or mortgage? Will it be more expensive and by how much and how soon?

John Lockwood: The market changes so rapidly and the Fed came out yesterday and raised interest rates three-quarters of one percent. We saw the 30-year mortgage increase by nearly half of one percent just overnight. This morning I’m reading that the average interest rate on a mortgage rate is 5.87 percent. That is up nearly 2.5% from earlier this year. As interest rates increase from the Fed – what they’re really doing is increasing what they call the benchmark – the benchmark is the federal fund rate. That’s the rate at which banks loan to each other and that really creates a type of base where rates continue to rise from there. So think about auto-loan, mortgages, credit card rates they’re all adjusting as we speak — higher — which means the cost of our debt is increasing and that will certainly slow down our overall economic production.

Q: Do you advise people to pay off credit card debt and lock in the rate for a car or home loan now?

John Lockwood: If you have variable interest rates we are telling our clients to re-finance, lock those into a fixed rate because those rates will continue to rise. The Fed has forecasted another 1.5% rate increase throughout the rest of this year. So we can expect all of those variable rate loans to adjust higher making the debt service more expensive.

Q: What should people who are nearing retirement do right now?

John Lockwood: Right now is a real critical time to huddle with your advisor and those experts to make sure that those investments in your portfolio are aligned to your goals. If you’re looking to retire in the near term and essentially convert the assets into income then the investments need to be positioned in a way or conservative manner – in other words – to reduce the risk of the stock market potentially going lower as rates continue to rise. For folks who have a little longer of a horizon, it’s equally important to remember what is the goal and ensure that the investments are in alignment with your goal.

Q: Are we headed toward a recession and do you think we’d get to a point where we could reach a depression?

John Lockwood: Based on what I’m seeing right now a recession is imminent. Meaning that, in a recession, the global economy is shrinking. Meaning that production is slowing down. Really that is the essence of what the Fed is doing, raising interest rates to slow down the economy. The consequence of that is that we’re going to see the economy go through a recession. Now the question is how long is that going to last? The Fed is not going to be incentivized to crash the market and put us into a deep recession and a depression. The Fed is really in a box, they have to raise the rates high enough to slow down the money supply, slow down the demand and that’s really what’s happening when folks are spending freely, which is great for the economy but it continues to put pressure on prices because the supply isn’t there. Long story short, I think what we’re seeing now is a short recession followed by economic growth in the midterm.

| VIDEO BELOW | Fed interest rate hike will make credit card debt more expensive

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