The Federal Reserve Wednesday approved its first interest rate increase in more than three years.
A .25% hike is the first of 7 projected hikes that are anticipated to take place in 2022.
The committee voting on rate hikes also hinted this week at three more potential hikes in 2023.
Impact on you:
Raising the interest rates impacts a person's credit card balance and their ability to get a loan or a mortgage. It even has an impact on savings accounts.
According to BankRate.com, the average credit card balance/debt for Americans is $5,525.
The average credit card interest rate is 16%. If your credit card company raises rates by 1% to 17%, you'll be paying an extra $200 more in interest over a 60 month or 5-year period.
Need help calculating credit card interest and balance payoffs? BankRate offers this free calculator tool.
Auto Loans:
Due to the supply shortage, many car dealers are not offering incentives off MSRP. In some cases, consumers are paying above sticker price on a new vehicle.
However, some dealerships have offered as low as 0% financing for those with an excellent credit history.
For a $30,000 car financed at 1.9% over 72 months, the average car payment sits at $482/mo.
A 1% adjustment to 2.9% over 72 months would increase your payment by $14/month, or $1,008 over the course of a 72-month auto loan.
Still, auto loan interest rates are nowhere near levels from 20 or 30 years ago.
Need help calculating an auto loan? Click here for a free auto payment calculator tool.
Home Loans:
At the height of the pandemic, 30-year fixed rate loans sat between 2.25% and 2.75% for consumers with excellent credit.
Today, interest rates are hovering in the 3-4% range.
As an example, a $450,000 home financed at 3.9% over 30 years carries a payment of around $2,123/month, not including taxes and insurance.
At a 4.9% interest rate, that will bring your monthly payment to $2,388. Over a 30-year period, that's an extra $95,400 in interest.
Like auto loans, today's rates are still nowhere near levels from the 80's, 90's or 2000's.
Click here to calculate interest and monthly payments on a mortgage loan.
*Disclaimer: The examples shown above are not based on any one particular case. They are meant to only add perspective on average price differences based on varying interest rates. Your particular interest rate will vary greatly depending on your debit to income ratio, credit score, type of loan requested and financial history.
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