FXstreet

The Federal Reserve has decided to raise interest rates by 0.25%. Here's what the move means for your student loans, mortgages, credit cards, and all other facets of your wallet.



Bankrate’s McBride noted that adjustable-rate mortgages only adjust once per year — so it’s not as if you will see your payments fluctuating on a monthly basis. However, this means that “the Fed could raise rates two or three times becore your rate adjusts. Then you’re looking at a significant rate increase,” McBride said. In his view, folks who have an adjustable-rate mortgage would be best served by locking in a low fixed rate while they still can — i.e, before the Fed makes further changes to interest rates.

“That’s the urgency now,” he said. “That adjustable rate mortgage at 3%, which could easily be at 5% in a couple of years, you could trade that away for a fixed-rate mortgage at 4%.”

Credit cards. If your credit card agreement says something to the effect of “APRs will vary with the market based on the Prime Rate,” you will likely see your rate go up by 0.25%.

Savings accounts. McBride has some bad news for every consumer who is hoping the rate increase will bring a commensurate increase to the interest rates applied to savings accounts.

“We are not going to see an improvement right off the bat,” he said. “A lot of banks are sitting on a pile of deposits, and their margins have really been squeezed by low rates. So the incentives for banks is to pass on higher rates on loans but not deposits so they can breathe some life into that margin.”

Mortgages. The rules for mortgages are roughly the same as those for student loans: if you have a fixed rate mortgage, you needn’t worry. If you have yet to take out a mortgage but plan to do so in the future, you will receive a slightly higher rate than you would have if you had locked in your rate during 2015 (or 2014, or 2013… you get the point). And if you have an adjustable-rate mortgage, you will see your rate go up.

Student loans. If you have a fixed-rate student loan — which you do if you borrowed from the federal government after July 1, 2006, or locked in a fixed-rate private student loan — Wednesday’s decision means nothing to you. Your rate will stay the same.

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