How does an increase in interest rates typically affect consumer behavior?

When interest rates increase, the cost of borrowing money tends to rise as well. This means that loans for things like homes, cars, and credit cards become more expensive due to higher interest costs, which can discourage consumers from taking on additional debt. As a result, many individuals may choose to reduce their borrowing, opting instead to save or pay down existing debts. The higher cost of financing can lead consumers to be more cautious with their spending, particularly for large purchases that often require loans. Thus, the general trend is that when interest rates go up, borrowing decreases, which can significantly affect overall consumer spending behavior.