Another interest rate hike from the Federal Reserve is on the way: Here's how it may affect you
Another interest rate hike from the Federal Reserve is on the way: Here's how it may affect you
Abstract
More from Personal Finance:How Fed's interest rate hikes made borrowing costlierTips to help stretch your paycheck amid high inflation'Ugly times' are pushing record annuity sales The next rate hike, which is widely expect to be the fourth straight 0.75 percentage point increase, will correspond with another rise in the prime rate and immediately send financing costs higher for many types of consumer loans. From your credit card and car loan to mortgage rate, student debt and savings, here's a breakdown of some of the major ways rate increases impact you: Although 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed's policy moves. As the federal funds rate rises, the prime rate does and credit card rates follow suit. Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans, so if you are planning to buy a car, you'll shell out more in the months ahead. "Car loan rates are the highest in 11 years," McBride said. Private student loans tend to have a variable rate tied to the Libor, prime or Treasury bill rates - and that means that, as the Fed raises rates, those borrowers are also paying more in interest. Currently, average private student loan fixed rates can range from 3.22% to 14.96% and 2.52% to 12.99% for variable rates, according to Bankrate. While the Fed has no direct influence on deposit rates, they tend to be correlated to changes in the target federal funds rate, and the savings account rates at some of the largest retail banks, which have been near rock bottom during most of the Covid pandemic, are currently up to 0.21%, on average.