HOUSTON – This week, in an effort to rein in high inflation, the Fed raised interest rates for the 5th time this year, up another 0.75%. That means credit cards, mortgages, and auto loans are going to cost you more.
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Credit card rates are the highest since 1996. Mortgage rates are the highest since the Great Recession of 2008 and auto loans are the highest since 2012.
The latest Fed rate hike is going to make carrying a balance on a credit card much more expensive, as most cards have variable interest rates.
If you’re only making the minimum payments on a $5,000 balance, the first four rate hikes already this year cost you an additional $870 in interest, according to Bankrate.com. The latest three-quarter point hike will now cost you $1,161, and more of what you pay will go to interest rather than debt.
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Mortgage rates have already risen. If you bought a $300,000 home at the start of the year on a 30-year average fixed rate mortgage of 3.11%, you’d be paying $1,283 a month, according to Forbes. If you bought it in August at 6.02%, you would pay $1,803 per month. And if rates go up another 0.75%, it’ll cost you $1,949 a month.
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Auto loans have increased along with car prices and interest rates. The average rates went from 5% to 6%. On a $40,000 loan with a 72-month term, you’ll pay an additional $1,348, according to Edmunds.com.
But there is a silver lining. Savings rates are also on the rise, reaching as high as 2.5% on some CDs and high-interest accounts.
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To protect yourself from these rising loan rates, try paying off credit card debt or transferring balances to 0% card offers, or reducing the equity in your home or personal loans.
If you’re buying a home, remember that you can refinance when rates come back down. And shop around before choosing a loan or savings account, to get the best rate.