首页 > News
The Federal Reserve is pausing rate hikes for the first time in 15 months. Here's the financial impact.
发布日期:2024-12-23 21:15:33
浏览次数:234

The Federal Reserve is pausing on raising rates, marking the first break after 15 months of consecutive increases, a change that could offer a hint of relief for consumers who are grappling with pricier mortgages, credit cards and other loans after 10 consecutive rate hikes. 

The difference in borrowing costs from March 2022, when the Fed began hiking rates in an effort to quash inflation, are stark. In early 2022, the rate for a conventional 30-year mortgage was about 3.2% — now it is 6.8%, meaning that the monthly mortgage payment on a typical $300,000 home now costs 50% more. The annual percentage rate on credit cards has hit record highs and now top 20%, while costs for other loans are also higher.

The central bank has been hiking rates in order to douse the hottest inflation in 40 years. The good news is that federal data on Tuesday showed that effort is working, with May's Consumer Price Index rising at the slowest pace in two years. Because of the progress on inflation, economists had expected the Fed to hold off Wednesday on another rate hike in order to gauge the economy's strength and to make sure the bank isn't "accidentally overtightening," according to Goldman Sachs analysts.

"Pausing the rate hikes is definitely better then them continuing it, but the damage for the most part has already been done," noted Matt Schulz, chief credit analyst at LendingTree. "If everyone was confident that there weren't going to be anymore rate hikes going forward, that would be a little different view. But that certainly still is up in the air about whether this is a short pause or if this is a longer term change."

Here's how the Fed's move to hold the line on interest rates may affect your money.

Mortgage rates

Mortgage rates are likely to hold steady following the Fed pause. That could provide a boost to consumers after the rapid surge in home loans, Michele Raneri, vice president and head of U.S. research and consulting at TransUnion, said in an email. 

Raneri said that a homebuyer taking out a 30-year loan at the current rate of 6.8% for a $300,000 home would have monthly payments of $1,956 — a 50% increase from the $1,297 monthly mortgage payment the same borrower would have paid in January 2022, when mortgage rates were at 3.2%.

Still, rates could fluctuate this year as the housing market reacts to economic uncertainty, according to Jacob Channel, senior economist for LendingTree. Mortgages have dipped since the debt ceiling issue was settled, a sign the housing loan market is sensitive to trends beyond the underlying federal funds rate, Raneri said.

"Going forward, it's likely that mortgage rates will continue to fluctuate as the housing market continues to react to the uncertainty that permeates today's economy," Channel said in an email. "That said, if the economy does cool over the coming months, then mortgage rates may end the year closer to 6% than 7%."

Selma Hepp, chief economist with real estate research firm CoreLogic, added in an email that mortgage rates, while gradually declining, "are likely to remain higher through the remainder of year."

Credit card rates

Consumers with credit card balances aren't likely to see relief anytime soon, according to LendingTree's Schulz. In fact, APRs could continue to rise, even despite a Fed pause, because some banks are still incorporating the most recent Fed rate hikes into their own fee schedule, he noted.

The typical rate for a new credit card is likely to jump above 24% this month, up from a record 23.98% in LendingTree's May analysis, Schulz noted. 

"That is just really, really high," he added.

APRs on existing credit cards is almost 21%, which is the interest rate paid by people who are carrying revolving balances on their cards, and marks the highest since 1994, Schulz noted.

Borrowers are essentially facing interest rates that are 5 percentage points higher than in March 2022, when the Fed began hiking rates, according to TransUnion. 

"Based on the current average total card balance per consumer of $5,800, this translates to an additional $290 of annual card interest rate charges per consumer," Raneri noted.

Auto loans

Loan rates for new vehicles have stayed constant for the past few months at an average of about 7%. That isn't likely to change even with the Fed leaving rates alone for now, said Ivan Drury, senior manager at Edmunds.com. Auto loan rates tend to reflect buyer demand for vehicles more than they do the Fed's interest rate decisions.

Car sales, while still way below pre-pandemic levels, remain fairly strong, while vehicle prices are still high after soaring during the pandemic. Unless sales slow significantly, companies and dealers are unlikely to reduce prices or offer better loan rates.

New vehicle prices averaged $47,892 in May, 1.3% below the peak in December. Yet any decline has been offset by higher loan rates, which have surged nearly half a percentage point over the same period.

Savings accounts, CDs

Yields on savings accounts and certificates of deposit are the highest they've been in a decade, although the pace of increases is slowing. With the Fed pausing on hikes for now, any further increases in yields may be comparatively small, said Ken Tumin, a banking expert and founder of DepositAccounts.com.

"Banks will have reason to slow their deposit rate increases," he said.

Still, it's worth noting that these accounts are much more rewarding than they were a year ago. The average online savings account yield is now 3.98%, up from 3.31% at the start of this year and from 0.73% from a year ago, according to DepositAccounts.com. The average yield on an online 12-month CD is 4.86%, up from 4.37% at the start of the year and from 1.49% a year ago.

What's next for the Fed?

The Fed signaled it may resume hiking rates late in the year, with policymakers forecasting a final rate of about 5.6%, indicating two more rate hikes before the end of 2023.

That surprised Wall Street, with stocks slipping after the Fed announcement. The Dow Jones Industrial Average dipped 1% on the prediction that more rate hikes could be in store.

"The battle against inflation is being won. This is now the time for the Fed to stop — not pause — interest rate hikes," said Nigel Green of deVere Group, a group of financial advisors, in an email. "The time lag for monetary policies is notoriously long."

In other words, consumers may have a wait until they see significantly lower borrowing costs.

With reporting by The Associated Press.

上一篇:Certifying this year’s presidential results begins quietly, in contrast to the 2020 election
下一篇:Sydney Sweeney Slams Women Empowerment in the Industry as Being Fake
相关文章