How latest interest rate hike will affect credit cards, mortgages, car loans
HOUSTON - This week in an effort to curb high inflation, the Fed raised interest rates for a 5th time this year, up another 0.75%. That means credit cards, mortgages and car loans are about to cost you more.
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Credit card rates are the highest they've been since 1996. Mortgage rates are the highest since the Great Recession in 2008 and auto loans are the highest since 2012.
The Fed’s latest rate hike is going to make carrying a balance on a credit card much more expensive, as most cards have variable interest rates.
If you make only the minimum payments on a $5,000 balance, the first four rate hikes already this year are costing you an extra $870 in interest, according to Bankrate.com. The latest three-quarter point hike will now cost you $1,161, and more of what you pay will go toward interest rather than debt.
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Mortgage rates have already been rising. If you bought a $300,000 dollar home at the beginning of the year for the average 30-year fixed rate mortgage of 3.11%, you’d pay $1,283 dollars a month, according to Forbes. If you bought it in August at 6.02%, you’d pay $1,803 a month. And if rates go up another 0.75%, it would cost you $1,949 a month.
Auto loans have gone up along with car prices and interest rates. Average rates have risen from 5% to 6%. On a $40,000 loan over a 72-month term, you'll pay an extra $1,348, according to Edmunds.com.
But there’s one silver lining. Savings rates are also up, reaching as high as 2.5% on some CDs and high-interest accounts.
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To protect yourself from these rising loan rates, try to pay down credit card debt, or transfer balances to 0% card offers, or lower interest home equity or personal loans.
If you're buying a home, remember you can refinance when rates come back down. And shop around before you choose any loan or savings account, to get the best rate.