MoneyWisdom Blog

What does Fed interest rate hike mean for you?

Posted by MaryJo Kurtz on Dec 18, 2015 9:55:10 AM

The Federal Reserve made headlines this week when it announced an increase in its key interest rate by a quarter percent after seven years of near 0% rates. What does this mean for you? We put the question to Hanscom Federal Credit Union’s Senior Vice President of Lending, Tom Becker.

“First off, there’s no need to panic. It’s only going up a quarter percent and the Fed has indicated that any further increases will be slow,” Becker said.

 

If you are in the market for a home, that there is no need to change your buying strategy. Mortgages are primarily based off the 10-year Treasury, he noted, and not the short term interest rates that just increased.

For current homeowners thinking of locking in to a fixed rate while the rates are low, Becker said to consider the expected length of the mortgage. “If they’re looking to fix it for a longer term, say 15 or 20 years, I don’t think those rates are going to change much. If they are looking to lock it in and fix it for a five year period of time, then maybe they want to lock it in.”

When it comes to home equity lines of credit, Becker noted that the shorter term fixed HELOCs will be affected because the prime rate recently increased.

When it comes to other types of borrowing and lending, the impact of the recent Federal Reserve rate hike varies.

“I don’t see it affecting our credit card rates right now. I don’t see it affecting our personal loan unsecured rates,” he said. “It will probably affect our car loan rates, and it will probably affect deposit rates at some later point.”

And that may be the silver lining. Investors have endured years of small returns on their savings accounts, often seeing returns of just a fraction of a percent. Will that be changing anytime soon?

“That’s what everybody’s hoping for. The change in deposit rates will probably take a little bit longer to happen. Most financial institutions will increase their borrowing rates first and then the deposit rates will large weeks or a month or two behind that,” said Becker.

Hanscom Federal Credit Union has some of the most competitive rates in the market. To review our current interest rates, visit hfcu.org/rates.

Review Current Rates

 

Topics: Personal Finance

MaryJo_KurtzMaryJo Kurtz is Director of Communications for Hanscom Federal Credit Union. She is an award-winning journalist and blogger with a passion for sharing money-saving ideas. You can reach her at mkurtz@hfcu.org.
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