How Fed hike will affect US consumers and overseas economies
[...] will people with adjustable-rate mortgages or home equity lines of credit.
The cumulative impact of another Federal Reserve interest rate hike — its fourth in 18 months — will range widely for individuals and businesses with loans or income-producing accounts.
A series of Fed hikes generally means that overseas investors in search of interest income can increase their returns by shifting money into the United States.
When the Fed lifts the short-term rate it controls by one-quarter of a percentage point, as it did Wednesday, it typically translates into a quarter-point rate increase for credit card debt and home equity lines, as well as for some adjustable mortgages.
Fed policymakers have raised their benchmark rate to a range of 1 percent to 1.25 percent and indicated that they foresee one additional hike this year, assuming that the economy remains on solid footing.
For someone with a $5,000 credit card balance who makes a minimum payment each month, the Fed's four rate increases since December 2015 equal an additional $700 in payments over the life of the loan, according to Greg McBride, chief financial analyst at Bankrate.com.
A. Because fixed-rate mortgage rates don't typically follow the Fed's changes.
Fixed long-term mortgages tend to track the rate on the 10-year Treasury, which, in turn, is influenced by such factors as investors' expectations of future inflation to global demand for U.S. Treasurys.
In December 2015, a week before the first increase, the average 30-year fixed mortgage rate was 4.06 percent, according to Bankrate.com.
Demand for the 10-year Treasury has risen, and so its yield has dropped, reducing mortgage rates with it.
A. Doug Amis, a certified financial planner in Cary, North Carolina, says consumers with less-than-sterling credit can expect to pay more, especially when financing the purchase of a used car.
Since rates began rising again, Amis has been advising retire