With the US Federal Reserve raising interest rates for the 10th time in a row, it is expected to have a significant impact on the real life of Americans.
On the 3rd (local time), the New York Times (NYT) reported on how the Fed’s successive rate hikes will affect ordinary consumers.
First, credit card interest rates, which are closely linked to interest rate hikes, are expected to rise. According to Bankrate.com, as of the 26th of last month, the average credit card interest rate in the United States was just over 20%. It is likely to rise further here. In March of last year, when the Fed started its interest rate hike rally, the US credit card interest rate was about 16%.
Auto loans tend to follow 5-year Treasury bonds that are subject to the Fed’s interest rates. However, in determining the car loan interest rate, in addition to the interest rate, credit history, vehicle type, loan period, and down payment are also included in the ratio calculation. According to Edmunds, a car price comparison site, the average interest rate for new car loans in March was 7%, up about 1 percentage point from six months ago.
Mortgages (home equity loans) vary from case to case.
The 30-year fixed-rate mortgage rate does not move with the Fed’s benchmark rate and generally follows the 10-year Treasury yield. This is influenced by a variety of factors, including the outlook for inflation, the actions of the Fed, and the reaction of investors.
Mortgage rates fell to nearly 6% in February after exceeding 7% last November for the first time since 2002, according to Freddie Mac, a national mortgage agency. Last week (April 24-28), it was about 6.4%. During the same period last year, the average interest rate on these loans was 5.1%.
However, in the case of other mortgages, they are closely linked to the Fed’s interest rate movements. Variable rate mortgages (ARMs), which have floating rates, generally rise within months of a change in the Fed’s rate.
Those seeking savings will have a relatively leisurely time, the NYT predicted. However, he explained that the Fed’s rate hike does not lead to an immediate increase in deposit interest rates.
This is because banks tend to raise interest rates when they want to accumulate more deposits. Of course, there is a possibility that the interest rate will be raised to attract customers who are engulfed in anxiety, as chaos has occurred in the financial industry recently, such as the Silicon Valley Bank (SVB) crisis.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.