The Federal Reserve on Wednesday approved its first interest rate hike in more than three years.
A 0.25% hike is the first of 7 scheduled hikes that are expected to take place in 2022.
The committee voting on rate hikes also hinted this week at three more potential hikes in 2023.
Impact on you:
Rising interest rates impact a person’s credit card balance and their ability to get a loan or mortgage. It even has an impact on savings accounts.
According to BankRate.com, the average credit card balance/debt for Americans is $5,525.
The average credit card interest rate is 16%. If your credit card company raises rates from 1% to 17%, you’ll pay $200 more in interest over 60 months or 5 years.
Need help calculating your credit card interest and balances? BankRate offers this free calculator.
Due to supply shortages, many car dealerships do not offer MSRP incentives. In some cases, consumers pay more than the list price on a new vehicle.
However, some dealerships have offered financing as low as 0% for those with excellent credit history.
For a $30,000 car financed at 1.9% over 72 months, the average car payment is $482/month.
An adjustment of 1% to 2.9% over 72 months would increase your payment by $14/month, or $1,008 over the course of a 72 month car loan.
Always, car loan interest rate are far from the levels of 20 or 30 years ago.
Need help calculating a car loan? Click here for a free automatic payment calculator.
Real estate loans:
At the height of the pandemic, 30-year fixed rate loans were between 2.25% and 2.75% for consumers with excellent credit.
Today, interest rates fluctuate between 3 and 4%.
For example, a $450,000 house financed at 3.9% over 30 years results in a payment of approximately $2,123/month, excluding taxes and insurance.
At an interest rate of 4.9%, this will bring your monthly payment to $2,388. Over a 30-year period, that’s $95,400 more in interest.
Like car loans, today’s rates are still far from the levels of the 80s, 90s or 2000s.
Click here to calculate interest and monthly mortgage payments.
*Disclaimer: The above examples are not based on any particular case. They are only intended to add perspective on average price differences based on variable interest rates. Your particular interest rate will vary greatly depending on your debit to income ratio, credit score, type of loan requested and your financial history.
Federal Reserve plans to raise interest rates in March 2022
Take advantage of low interest rates now