The interest rate dial just clicked higher, but your mortgage probably won't jump with it immediately. The Federal Reserve has lifted its benchmark rate for the first time since 2023, making it costlier for banks to borrow from one another and nudging many consumer rates upward over time. The move tends to hit short-term, variable products first, the Washington Post reports. Credit card APRs and adjustable-rate loans are likely to creep higher, and auto loans could edge up by a few dollars a month on average. High-yield savings accounts and short-term CDs may also pay slightly more.
Longer-term borrowing is a different story. Fixed-rate mortgages take their cues mainly from 10-year Treasury yields, which have already climbed above 5% amid concerns over government debt, conflict in the Middle East, and stubborn inflation tied in part to higher oil prices after the US and Israel attacked Iran. That's helped push 30-year mortgage rates to around 6.8%.
- For now, "the reality is that a single quarter-point rate increase isn't really going to have a huge impact," Matt Schulz, chief consumer finance analyst at the online loan marketplace LendingTree, tells the AP. It will be a different story, he says, if this is the first in a series of rate hikes. "When this all becomes impactful to people is when you stack a few these on top of each other over time, and it adds up to something bigger," Schulz says.
The broader goal of the Fed's hike: cool demand and ease inflation that has been squeezing household budgets. "I know a rate hike may feel like bitter medicine, but we need it because we can't just keep having this runaway price growth," Ted Rossman, chief consumer finance analyst at Money Management International, tells the Post.
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