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Fed rate hike likely means more expensive credit cards and mortgages, but savers may rejoice
The move is expected to lift credit card APRs quickly and improve returns on high-yield savings accounts and certificates of deposit.
- On Wednesday, the Federal Open Market Committee, led by Chairman Kevin Warsh, raised the federal funds rate by one quarter percentage point to a target range of 3.75% to 4.0%.
- Inflation concerns prompted the central bank's action, as consumer prices have remained above the Fed's 2% target for more than five years. The Labor Department reported Friday that prices rose 3.4% in August.
- Borrowing costs for homes and autos will rise as prime rates adjust. LendingTree analyst Matt Schulz noted that while a single increase seems small, "stacking a few these on top of each other over time" adds up to something bigger.
- Auto loan rates are near multi-year highs, with new-vehicle transaction prices averaging around $50,000 according to Kelley Blue Book. A quarter-point mortgage rate increase could raise monthly payments by approximately $65 for a borrower financing the average $389,367 home loan.
- While borrowers face strain, savers can expect better returns on high-yield accounts. LendingTree's Schulz said, "It's a great time to shop for an online high-yield savings account," as returns improve in the near future.
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Leaning Left39Leaning Right10Center86Last UpdatedBias Distribution64% Center
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64% Center
L 29%
C 64%
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