The Fed Just Raised Rates Today: What a rate hike means for you (get ready to pay more)

[SirLinksALot]

SOURCE: USA TODAY

URL: http://www.usatoday.com/story/money/personalfinance/2017/03/15/federal-reserve-interest-rate-hike-mortgages-credit-cards-auto-loans-savings-rates/99179006/

The expected Federal Reserve decision Wednesday to lift its benchmark short-term interest rate by a quarter percentage point is likely to have a domino effect across the economy as it gradually pushes up rates for everything from mortgages and credit card rates to small business loans.

Consumers with credit card debt, adjustable-rate mortgages and home equity lines of credit are the most likely to be affected by a rate hike, says Greg McBride, chief analyst at Bankrate.com. He says it’s the cumulative effect that’s important, especially since the Fed already raised rates in December 2015 and December 2016.

“These interest rate hikes could add up to hundreds of dollars per month in extra fees for credit card, adjustable-rate mortgage and HELOC borrowers,” McBride says.

The Fed’s likely decision to lift the federal funds rate, which is what banks charge each other for overnight loans, will have several effects on consumers. Here's how it may impact mortgage rates, auto loans, credit cards and bank savings rates:

Mortgages

The Fed’s key short-term rate affects mortgages and other long-term rates only indirectly.

Thirty-year fixed mortgage rates hit a 2017 high last week as the average jumped to 4.21% in anticipation of the Fed’s move Wednesday and another similar hike. That is up from a year ago when the average 30-year mortgage rate was 3.68%, according to Freddie Mac.

“For consumers currently shopping for a mortgage to purchase a property or refinance an existing loan,” says NerdWallet mortgage analyst Tim Manni, a Fed rate hike "shouldn’t feel like a real shock to the system since the rate move has already been 'baked' into the market.”

A third hike later this year could boost the rate by as much as another quarter-point or so, increasing the monthly mortgage payment on a $200,000 home by up to $30.

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[XenaLee]

For one thing.... it means that there is not a Democrat in the White House, so the feds are not going to continue to prop up that economy via no interest rate increases.  Predictable.

The national debt will spiral upwards which could have catastrophic consequences for the "now" Republican economy.  Also predictable.

[IsailedawayfromFR]

For one thing.... it means that there is not a Democrat in the White House, so the feds are not going to continue to prop up that economy via no interest rate increases.  Predictable.

The national debt will spiral upwards which could have catastrophic consequences for the "now" Republican economy.  Also predictable.

Artificially keeping rates low does not 'prop up' the economy. It has purely short-term benefits toward keeping interest payments on debt low to score political points on whoever is in office and bankers rich. Those two are not 'the economy'.

[ABX]

Artificially keeping rates low does not 'prop up' the economy. It has purely short-term benefits toward keeping interest payments on debt low to score political points on whoever is in office and bankers rich. Those two are not 'the economy'.

Ideally*, the federal interest rate should be directly tied to inflation to keep the currency stable. Our current inflation rate is 2.7%
http://www.usinflationcalculator.com/inflation/current-inflation-rates/

The current interest federal interest rate (funds rate) is .75%. 
http://www.bankrate.com/rates/interest-rates/prime-rate.aspx

*I note this is ideally based on our current currency structure, not ideal in terms of comparing to a different weighted standard such as the gold standard.