How the Fed rate hike could impact your finances
MIAMISBURG, Ohio (WKEF/WRGT) - Anyone with a mortgage, has student loans or frequently uses credit cards, it's news you need to know: the Federal Reserve is raising interest rates.
All consumers will be impacted by the hike, with at least one more expected by the end of the year, but this one will likely impact you more than others. The benchmark rate is being bumped up a quarter of a percentage point, pushing the funds rate target from 1.75 to 2 percent.
The hike signals a strong economy.
"I think the economy is fantastic," Miamisburg resident Denise Buckingham said. "I like that there's a low unemployment."
"Gradually returning interest rates to a more normal level as the economy strengthens is the best way the Fed can sustain an environment in which American households and business can thrive," Federal Reserve Chair Jerome Powell said.
The rate hike means anyone with private student loans could see the interest charged month-to-month increase, and Americans with credit cards and adjustable rate mortgages might see their monthly payments rise.
"It's still at 4 or 5 percent," Miamisburg resident David Haase said, "and it's not much different than the rate when I bought my unit two years ago."
However, those with 30-year fixed rate mortgages or other long-term loans like the Haases likely won't feel the impact.
"We're looking for a new home," he said. "Things have been going really well. Last year, we made more money than expected."
The two are feeling the impact of a strong economy and a sellers market in their search.
"It's pretty crazy," Haase said. "As soon as we like a house and we put an offer on it, it's sold already or under contract."
But what if you're looking for a new ride instead of a new address? A quarter point rate hike could get passed on to new auto loans, but existing ones should not see a change.
"Right now, we're able to afford to do some remodeling and things like that," Buckingham said.
The good news is banks will have more room to pay higher interest rates on customers deposits to their savings.