TAMPA. FLA. — As prices continue to climb at the fastest pace in 40 years, the Federal Reserve delivered a big punch to fight inflation.
“Interest rates are going to rise at a pace that we haven’t seen at quite some time,” chief financial analyst at Bankrate.com Greg McBride said.
The Fed Wednesday, raising rates by half a percentage point.
‘We’re likely to see more of these larger half point rate hikes as the year progresses, particularly if inflation doesn’t cooperate,” McBride said. So, interest rates starting from very low levels are not only going to go up but they're going to go up faster."
This move sends financing costs higher for many types of consumer borrowing. This move will make it more expensive to carry a balance on a credit card or take out a car loan.
Robert Blount just bought a used car for his son.
“Been looking for a year, it’s been somewhat frustrating,” he said.
Although he’s not financing, Blount said buying a car in this climate is not for the faint of heart.
“It’s just becoming a tough market, real estate wise, auto wise and with interest rates going up, it’s just going to continue to get tough for us all really,” Blount said.
Volkswagen of Wesley Chapel general manager Matt Rogerson said car buyers should do their research and set a budget before heading to the dealership.
“APR’s are largely credit based and reputable dealers work with a lot of different lenders, some banks, some credit unions," Rogerson said. "We shop those to get our consumers the best rates possible."
McBride said credit cards will be among the first to jump, usually within a billing cycle or two.
“The step to take now, be aggressive about paying down the balance. Grab a 0% or other low-rate balance transfer offer,” he said.
Homeowners won’t be impacted immediately by the rate hike. However, anyone shopping for a new house is going to pay more for their next home loan.
“People that have been pre-approved previously and are out looking for a home, I would highly recommend that they go back to their lender and discuss what they can afford now that rates are higher," Achieva Credit Union senior mortgage officer Jason Anger said. "That’s very important because they don’t want to be spending their time looking at homes that they can no longer afford."
Mortgage rates have already jumped above 5% in anticipation of the Fed's actions. That adds about $370 to the monthly payment on a median-priced house, but it’s not all bad news.
“Over time your savings will earn more, but you have to have your money in the right place. A lot of banks are going to be pretty stingy on the payouts. Be sure you’re shopping around,” McBride said.