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Loans becoming more expensive after interest rate hike

Posted at 8:58 PM, Jun 15, 2022
and last updated 2022-06-15 21:58:37-04

CORPUS CHRISTI, Texas — When Peter Patel walks into his grocery store, QC Meat Market in Corpus Christi, he has a few things on his mind.

Not having enough products because of supply chain issues, paying higher prices for those products, and customers that are spending less at his business because of inflation.

Patel said his business isn’t doing as well as last year because of all those factors, but he didn’t expect an even bigger factor:

The federal interest rate going up 0.5 percent last month.

“We were expecting some to slow the economy and the federals don’t have no choice, but we wasn’t expecting this big of a hike,” Patel said.

On Wednesday, the Federal Reserve announced that the federal interest rate is going up by 0.75 percent.

Patel said he’s already having a hard time paying off his business loan, and with the interest rate increase, he’s reconsidering a loan he was going to take out to remodel his store.

“If the interest rates jack up, hike up, then we have to rethink about it because then everything else will go up,” he said.

Texas A&M University-Corpus Christi professor of economics Dr. Jim Lee said the interest rate hikes aren’t good for businesses who have loans just like Patel’s.

He said the rate hike will also affect retirement savings, general savings, mortgage rates, and credit cards.

Lee added the Fed is raising the interest rate so people will stop spending, which will lower inflation because there’s less demand for products.

“Short-term pain in exchange for long-term gain,” Lee said.

Lee is expecting the interest rate to go even higher in the future, which means the economy could slow down.

He said hopefully the economy won’t slow down enough to cause a recession.

While a select few are affected by loans, others will be affected because they take out credit cards.

Jack Brandon, the senior debt consultant for Debt Redemption said they have been seeing about triple the people consolidating their credit cards.

He said because the interest rate went up, more people are having to rely on credit cards, but they’re unable to pay them all off.

“They’re using their credit cards to again, meet their basic needs and then they eventually run out of room as they max out their credit cards,” Brandon said.

He added people with variable interest rates would be affected the most.

While Patel said he only has one credit card, he’s already preparing for the future of his business by saving.

“Just watch your cost, try to save unnecessary expenses,” Patel said.