With the short-term benchmark rate that the Federal Reserve announced Wednesday and earlier rate hikes, economists and investors foresee the fastest rate increases since 1989.
WASHINGTON — Record-low mortgages are long gone. Credit card rates will likely rise. So will the cost of an auto loan. Savers may finally see a noticeable return.
How will it affect your finances? These are some of the most common questions being asked about the impacts of the rate hike.Rates on home loans have soared in the past few months, mostly in anticipation of the Fed’s moves, and will probably keep rising. For now, though, faster inflation and strong U.S. economic growth are sending the 10-year Treasury rate up sharply. As a consequence, the national average for a 30-year fixed mortgage has jumped from 3% at the start of the year to well above 5% now.
Rates for buyers with lower credit ratings are most likely to rise as a result of the Fed’s hikes. Because used vehicle prices, on average, are rising, monthly payments will rise too.For users of credit cards, home equity lines of credit and other variable-interest debt, rates would rise by roughly the same amount as the Fed hike, usually within one or two billing cycles. That’s because those rates are based in part on banks’ prime rate, which moves in tandem with the Fed.
Savings, certificates of deposit and money market accounts don’t typically track the Fed’s changes. Instead, banks tend to capitalize on a higher-rate environment to try to increase their profits. They do so by imposing higher rates on borrowers, without necessarily offering any juicer rates to savers.
While bitcoin prices were mostly unchanged after the Fed’s announcement, crypto prices had declined in the days leading up to the central bank’s move. They dropped by a third in seven days.Higher interest rates mean that safe assets like bonds and Treasuries become more attractive to investors because their yields are now higher. That, in turn, makes risky assets like technology stocks and cryptocurrencies less attractive.
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