The Federal Reserve's latest hike will further magnify borrowing costs for homes, cars and credit cards, though many borrowers may not feel the impact immediately.
The central bank is aggressively raising borrowing costs to try to slow spending, cool the economy and defeat the worst outbreak of inflation in two generations.
That’s because mortgage rates don’t necessarily move in tandem with the Fed’s increases. Sometimes, they even move in the opposite direction. Long-term mortgages tend to track the yield on the 10-year Treasury note, which, in turn, is influenced by a variety of factors. These factors include investors’ expectations for future inflation and global demand for U.S. Treasurys.
Wednesday’s rate hike won’t likely affect new-vehicle sales much because those buyers are mainly affluent customers who won’t be squeezed by a relatively small uptick in monthly payments, said Jonathan Smoke, chief economist for Cox Automotive. By contrast, he said, used-car buyers with weaker credit who pay higher loan rates could be hurt.
Those who don’t qualify for low-rate credit cards might be stuck paying higher interest on their balances. The rates on their cards would rise as the prime rate does. But online banks and others with high-yield savings accounts are often an exception. These accounts are known for aggressively competing for depositors. The only catch is that they typically require significant deposits.Like many highly valued technology stocks, cryptocurrencies like bitcoin have sunk in value since the Fed began raising rates. Bitcoin has plunged from a peak at about $68,000 to $21,000.
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