Record-low mortgages below 3% are long gone.
The substantial half-point hike in its benchmark short-term rate that the Federal Reserve announced Wednesday won't, by itself, have much immediate effect on most Americans’ finances. But additional large hikes are expected to be announced at the Fed's next two meetings, in June and July, and economists and investors foresee the fastest pace of rate increases since 1989.
Here are some questions and answers about what the rate hikes could mean for consumers and businesses:Rates on home loans have soared in the past few months, mostly in anticipation of the Fed’s moves, and will probably keep rising. In part, the jump in mortgage rates reflects expectations that the Fed will keep raising its key rate. But its forthcoming hikes aren't likely fully priced in yet. If the Fed jacks up its key rate to as high as 3.5% by mid-2023, as many economists expect, the 10-year Treasury yield will go much higher, too, and mortgages will become more expensive.
Still, the number of available homes remains historically low, a trend that will likely frustrate buyers and keep prices high.Fed rate hikes can make auto loans more expensive. But other factors also affect these rates, including competition among car makers that can sometimes lower borrowing costs. Those who don’t qualify for low-rate credit cards might be stuck paying higher interest on their balances. The rates on their cards would rise as the prime rate does.
This is particularly true for large banks now. They’ve been flooded with savings as a result of government financial aid and reduced spending by many wealthier Americans during the pandemic. They won’t need to raise savings rates to attract more deposits or CD buyers.
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