Savers benefit from higher yields, but borrowers pay more as the Federal Reserve raises its key interest rate.
It works this way.
Consumers with revolving debt can expect credit card rates to rise within one or two billing cycles due to the Feds actions. According to Bankrate.com, the average credit card rate was recently 17.25 percent, up from 16.34 percent in March.
Greg McBride, the chief financial analyst at Bankrate.com, said that it will be a drumbeat of higher rates for cardholders every couple of statement cycles.
The rising cost of buying a vehicle and the price you pay for gas are overshadowing the increases in car loans. The five-year Treasury note, which is influenced by the Fed's key rate, is one of the factors that determines how much you'll pay.
The rate calculation takes into account a borrower's credit history, vehicle type, loan term and down payment.
In the second quarter, the average interest rate on new-car loans was 5 percent, up from 4% in the same period a year ago. The share of new-car buyers paying more than $1,000 a month on their loans hit a record last month, according to the website.
Depending on the loan you have, the rate increase may affect your payments.
Current federal student loan borrowers aren't affected because their loans carry a fixed rate
The 10-year Treasury bond auction in May is when new batches of federal loans are priced. The rates on those loans have already gone up, and will go up even more before the year ends.
Private student loan borrowers should expect to pay more because their loans are linked to benchmark rates. Within a month, those increases are usually present.
Rates on 30-year fixed mortgages don't move in tandem with the Fed's benchmark rate, but instead track the yield on 10-year Treasury bonds, which are influenced by a variety of factors
Since the start of the year, mortgage rates have risen by more than two percentage points, though they are down from their highs, as traders temper their expectations for Fed rate increases in the future, despite stubbornly high inflation.
Freddie Mac's primary mortgage survey shows that the 30-year fixed rate mortgage averaged 5.47 percent as of July 21, down from 5.81 percent a month ago but up from 2.78 percent a year ago.
Home loans are more tied to the Fed. After a change in the Fed's rates, home equity lines of credit and variable-rate mortgages tend to rise within two billing cycles.
Savers will have an easier time if they want to get a better return on their money.
An increase in the Fed's key rate can lead to banks paying more interest on their deposits. Many banks already had plenty of deposits, but that may be changing at some institutions.
The rates on certificates of deposit have gone up. In June, the average one-year C.D. at online banks was 1.9 percent, up from 1.5 percent the month before.
The five-year C.D. increased in June from May.
All Rights Reserved © 2024
