The Fed raised rates another 75 basis points on July 27. The news, while not surprising, comes after Treasury Secretary Janet Yellen told Meet the Press, that inflation is too high but assured Americans that “this is not an economy that’s in recession.”
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So what does the increase mean to your personal bottom line?
As interest rates rise, the cost of borrowing money — everything from home loans to credit cards — will go up.
How will the sting affect your household finances?
It will touch a number of areas, some harder than others, but it may not be immediate. Now is a good time to begin to reevaluate your household budget and look for areas you may be able to reduce spending so you can try to pay down credit card debt or reduce your reliance on credit cards if you’ve been using them to make ends meet.
Here are a few areas where some, but not all, Americans may feel the pinch.
Mortgage Loans and Re-fis
Unless you have an adjustable rate mortgage or plan to buy a home soon, the interest rate hike should not affect your current fixed rate mortgage. Eventually, mortgage interest rates for new mortgages and ARMs will rise. If you’re planning to refinance, now may be a good time while interest rates are still low and home prices are high.
If you’re planning to buy a home, the news isn’t as bleak as it may seem. As interest rates rise, home prices may begin to fall. So, your monthly mortgage payment for any given house you choose to purchase could be the same, but your interest payment will make up more of it.
There’s more good news, too. Keith Gumbinger, vice president at HSH.com, told The New York Times, “[R]ates could rise considerably from present levels and still be considered low by historical standards.”
Credit card companies must give consumers 45 days’ notice before raising rates or increasing fees, so you have time to prepare…
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