Credit Card and Mortgage Rates Going Up
“The Federal Reserve has announced that it will raise interest rates by 25 basis points. This means that it is increasing the target for short term interest rates to a range of 0.25% to 0.50% from a range of 0% to 0.25%.
Within minutes of the Fed’s decision Wednesday, Wells Fargo, JPMorgan Chase and US Bancorp became the first banks to announce that they would increase their prime rate, a rate used for consumer loans like mortgages.
Mortgages. The rules for mortgages are roughly the same as those for student loans: if you have a fixed rate mortgage, you needn’t worry. If you have yet to take out a mortgage but plan to do so in the future, you will receive a slightly higher rate than you would have if you had locked in your rate during 2015 (or 2014, or 2013… you get the point). And if you have an adjustable-rate mortgage, you will see your rate go up.
Student loans. If you have a fixed-rate student loan — which you do if you borrowed from the federal government after July 1, 2006, or locked in a fixed-rate private student loan — Wednesday’s decision means nothing to you. Your rate will stay the same.
If you have a variable-rate student loan, you will see your rate start to fluctuate. Assuming you have a variable-rate loan that bases its rate on LIBOR (the London Interbank Offered Rate), this fluctuation will occur on a monthly basis.
Credit cards. If your credit card agreement says something to the effect of “APRs will vary with the market based on the Prime Rate,” you will likely see your rate go up by 0.25%.
HELOCs. If you have a home equity loan (also known as a home equity line of credit, or HELOC) and are in the interest-only portion of your loan, your monthly payment will get higher with a rate hike. But as with virtually every other item on this list, the increase should not break your back.
“An increase in 25 basis points is only going to cause customers’ monthly payments to go up about $10 to $11 per month” assuming it’s a $50,000 HELOC, explained Mike Kinane, home equity general manager at TD Bank. “That’s not cause for triggering a refinance. Rates are still historically low.”
Stock Portfolio. In short, the Fed’s move is bad news for bonds, mediocre news for the equity markets and, according to one expert, good news for commodities and stocks relating to consumer goods, food and utilities.”