The Consequences of a National Credit Downgrade on Americans

August 5th, 2011

With all the budget and debt ceiling talk going on in Washington D.C., consumers want to know how the national financial situation will effect each one of us. And although we have avoided defaulting, it will indeed have an impact.

In her blog post “Consequences of a U.S. Credit Downgrade,” Vera Gibbons explains that a credit downgrade from AAA to AA is still possible. Like a credit score, this lower rating will force the United States to pay higher interest rates. Since interest rates for American borrowers are linked to U.S. Treasuries, this would cause a hike in interest rates across the board.

Using data from, Gibbons estimates that mortgage rates will increase by .25% to 1%, and it may become more difficult to get approved. If you’re thinking of buying or refinancing, do it sooner rather than later.

Credit card rates will also increase by up to 1%, according to Gibbons says,

First, the good news: The CARD Act prevents interest rate hikes retroactively – on existing balances.  This protection does not extend to new charges, however.  That’s where you’d get hit. All the issuer is required to do is give you 45 days notice prior to raising rates, which currently average 14.08%.

Can’t forget about private student loans and car loans either – those will also increase by up to 1%.

If you’re in the process of shopping for a home, keep these increases in mind. You may want to add a little bit of cushioning to your budget to ensure that you will still be able to afford payments if rates do indeed go up.

Acadia Lending Group LLC

10 Donald B. Dean, Suite 2
South Portland , Maine 04106

Phone: 207-899-4500

Fax: 207-899-4503

NMLS: 370636


Contact Us

Search Our Site