The Federal Reserve’s move to raise its key rate by a half-point brought it to its highest range in 14 years, meaning anyone borrowing money to make a large purchase, such as a home, car or large appliance, will take a hit — here's what to know
The Fed's goal is to slow consumer spending, thereby reducing demand for homes, cars and other goods and services, eventually cooling the economy and lowering prices.
That said, Hoyt noted that household debt payments, as a proportion of income, remain relatively low, though they have risen lately. So even as borrowing rates steadily rise, many households might not feel a much heavier debt burden immediately. Those who don’t qualify for low-rate credit cards because of weak credit scores are already paying significantly higher interest on their balances, and they’ll continue to.
In general, banks tend to capitalize on a higher-rate environment to boost their profits by imposing higher rates on borrowers, without necessarily offering juicer rates to savers.Last week, mortgage buyer Freddie Mac reported that the average rate on the benchmark 30-year mortgage dipped to 6.33%. That means the rate on a typical home loan is still about twice as expensive as it was a year ago.
Ivan Drury, Edmunds' director of insights, says financing the average new vehicle with a price of $47,000 now costs $8,436 in interest. That’s enough to chase many out of the auto market.
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