With Greg McBride, Chief Financial Analyst, BankRate.com
Greg McBride presents us with BankRate.com’s 2016 Financial Outlook. Concerning the Federal Reserve, he doubts that the Fed will actually go through with raising interest rate changes four times in 2016, as they’ve indicated. Greg predicts interest rate changes will only happen twice in 2016— perhaps three times at the most.
Interest rates have been so low for so long that banks, which make their money on the spread between what they earn on money loaned versus money paid to savers, are reluctant to increase the interest paid on deposits. Therefore, investors will have to shop around actively to earn the highest return available in the marketplace.
Greg cautions borrowers to avoid adjustable rate loans in a rising interest rate environment. He states that now is a great time to switch to a fixed-rate mortgage to avoid higher monthly payments in the future.
Greg also warns against cashing out of your CDs early, since early withdrawal penalties could cost you more than the interest you’ve earned. He suggests biding your time and letting that money stay until maturity.