What the Federal Reserve rate hike means to your wallet

What the federal rate hike means for your wallet

The Federal Reserve has raised interest rates three-quarters of a point for the third time this year. FOX 26 Consumer Reporter Heather Sullivan explains what that could mean for you.

HOUSTON - To help curb inflation, the Federal Reserve raised the target federal funds rate for the third time this year, this time up three-quarters of a percent. That's the biggest increase since 1994.

It means credit card, mortgage, and auto loan rates are about to go up again.

"The committee raised the target range for the federal funds rate by three-quarters of a percentage point, resulting in a one and a half percentage point increase in the target range so far this year," said Fed Chair Jerome Powell.

MORE: U.S. inflation hit 8.6% in May, a new 40-year high

If you’re looking to buy a home, the average interest rate for a 30-year fixed-rate mortgage has jumped from 3.11% at the end of last year to 6.28% this week. According to Grow's mortgage calculator, a $300,000 loan that cost you $1283 a month in January, now costs $570 more a month.

"This shelter cost issue is really turning out to be a crisis for many Americans who are trapped by high rent and yet don’t have the means to buy a home," explained Mark Hamrick with Bankrate.com.

MORE SULLIVAN'S SMART SENSE

Creditcards.com says the average variable credit card rate is 16.61% right now but could hit a record near 19% by the end of the year.

If you have the average credit card balance of $5,525, and if the rate climbs to 18.61%, and you make only the minimum payments, it will cost you an additional $832 to pay it off.

Moves you can make to fight inflation costs

FOX 26 Consumer Reporter Heather Sullivan has some smart sense on what you can do to help fight inflation costs.

Buying a car? Auto loan rates don't climb as quickly, but new car prices are up 13% over last year, and used cars are up 16%, according to the Bureau of Labor Statistics.

MORE: Car buyers using new website to turn tables on dealership markups

The biggest problem comes for buyers who take out longer-term loans of 5, 6, or 7 years in an attempt to lower their monthly payments.

"The problem is with a new car, the minute you drive that car off the lot, you are underwater," said Hamrick. "The amount you owe is more than the car is valued at."

Here’s some Sullivan's Smart Sense to save money, as the Fed is expected to continue to increase rates over the next couple of years:

Pay down as much credit card debt as you can before your rates go up.
Shop around for mortgage and auto loans to find the lowest rates that you can qualify for.