The Federal Reserve’s decision today to raise interest rates can have a direct effect on the cost of housing, autos, student loans and credit cards. The increase however, won’t necessarily be felt right away. Now is a great time to look at what rate increases mean to you over time and how additional increases in the future may affect your bottom line.
If you are a saver this is good news for you. In recent years good savers have made next to nothing in interest rate payments from their banks. The interest rate increase should rise after a lag of about six months and add more money to your pocket over the next couple of years.
If you’re looking to buy a home with a 30 year fixed rate mortgage the interest rate increase will not have a direct impact on long term rates at this time. However, as the Fed rates go up, banks will find a way to pass along their higher borrowing costs. Banks factor in anticipated future rate increases and their costs for long term loans, and the Feds have suggested that interest rates are likely to continue rising for years.
Auto loan rates will slowly climb in response to the Feds increase. If you are thinking of buying a car in the next couple of years, you may want to buy it sooner than later, as it is predicted that rates will continue to rise.
If you have a Federal student loan, you have a fixed rate loan and will not be affected. Private loans may be variable, which means borrows will likely pay more in interest. If you are taking out new student loan debt in the near future, expect to see higher payment due to interest rate increases over the next few years.
Credit cards are revolving loans with variable rates. You will feel the most impact from the Fed increase for revolving debt. A quarter percent rate increase should be passed along to the consumer within weeks. Now is the best time to pay down your revolving debt to avoid paying more.