The Federal Reserve’s decision Wednesday to raise its benchmark short-term interest rate will slowly push up rates on everything from mortgages and credit cards to savings accounts.
The Fed increased its federal funds rate by 0.25 percentage points. It was only the second increase in more than a decade. Chairwoman Janet L. Yellen said at a press conference that the economy had shown enough improvement in the last year to warrant higher increases and projected three more rate hikes in 2017.
Here’s how the rate hikes will affect your pocketbook.
Mortgage rates are already historically low and the Fed’s short-term rate bump — which indirectly affects mortgage rates — is not likely to make a big difference in the next few months. But, subsequent hikes by the Fed in 2017 could start to really add to the cost of a home.
Zillow and other industry watchers say mortgage rate increases have more of an impact in costly home markets, like San Diego County.
Rates have already gone up since president-elect Donald Trump’s victory.
If you have a credit card with a variable rate or a home equity line of credit, you’ll feel Wednesday’s Fed move pretty quickly.
Average credit card interest rates are about 16.28 percent, while home equity lines are about 4.78 percent, says Bankrate. And banks will pass along that quarter-point increase in the fed funds rate to consumers in a few weeks. So, it will make sense to pay this type of debt off before rates get too high or get into some sort of fixed-rate repayment.
“The cost of carrying that debt every month is going to get heavier and heavier,” Bell said.
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