Are Interest Rate Hikes In Near Future?
Consumer spending has always been a major percentage of the overall GDP (Gross Domestic Product) in the U.S.A.; after the recession in 2008, consumer spending was at an all time low; in the three years following this time, we witnessed the highest savings rates of all time amongst the consumer public whom we rely upon to keep spending. Many analysts simply state that if the general public don’t start buying again, we will never recover.
There have been other negative factors that have impacted household earnings; the use of technology, outsourcing, and the rewriting of job descriptions in the Corporate world; in summary, the people are nervous and the majority of U.S. families were actually negatively impacted by the economic changes after the fall of the mortgage and banking industry in 2008.
An official at the Federal Reserve Bank of Atlanta recently said that he anticipates the first small rate increase to appear in the 2nd half of 2015; however, other officials are very nervous about voting in increases which may further make consumers nervous and send the economy into negative territories once again.
Critics of the Federal Reserve Bank have said that keeping such low rates would threaten a high rate of inflation since it has hurt savers who have looked elsewhere to earn interest on their money.
If a monetary policy isn’t kept loose for a while, the economy may stall with signs of slowed growth. If on the other hand, the Fed keeps a loose policy, the unemployment rate continues to decrease, corporations and investors increase spending, and consumer confidence rises, we would realize slow and solid economic growth.
In summary, it would be prudent not to expect a quick and sharp rise in interest rates any time soon and would also be fair for real estate investors or home buyers not to be fooled by a false perception of rushing to beat the market – this may have been part of what got us into the mess in the first place.
Property taxes in many places have been adjusted downward since property taxes are a percentage of market value; when property values drastically dropped, homeowners applied for the recalculation and adjustment of their property taxes; thus, lowering tax revenue.
Conversely, property insurance has seen rises since the shortfall of the economy, in troubled economic times, we always witness an increase in Claims presented to insurance companies, an increase in fraudulent claims, and more customer service activity requesting the reduction of rates by amending coverage. Insurance carriers pay claims from the direct sum of premium collected; when the claims ratio is higher, it is necessary to increase premium for a large segment of clients in order to replenish required reserves to maintain the financial stability of the insurance company.