How Will the Fed Rate Hike Affect Your Wallet

Filed under: Market Comentary, Mortage Industry News, Mortgage Rates

By now, you’ve probably heard that the Federal Reserve Board did raise the prime lending rate by .25% on December 16, marketing the first such hike since 2006.  What exactly will this mean for you and your budget?  Let’s examine a few aspects…

Financial PlanningFixed Rate Home Loans

Overall, long term mortgages will not see much of an increase as a result of the Fed’s action.  Mortgage rates are based more on US Treasury yields rather than the prime rate and the Fed has little influence over these longer term, fixed rate loans.  If you’re in the process of buying a home, check with your lender but chances are you’ll be ok.

Home Equity Lines of Credit (HELOC)

HELOCs, however, are tied to the prime lending rate so expect to see a small jump in your payment.  The increase isn’t much though – about $2-3 per month for every $10,000 that you have borrowed.  With fixed rates being so low right now, it could be a smart time to combine your 1st mortgage with your HELOC and refinance out of your adjustable situation.

Credit Cards

If you carry a balance on any of your cards, expect to see an increase in the interest rate charged.  Credit card rates are determined by adding a fixed margin to the prime rate so when prime moves, so does the rate on your card.

Car Loans

Your existing car loan is most likely a fixed rate, meaning the rate hike won’t affect you.  On future purchases, you might see slightly higher rates but overall, it is unlikely to affect your ability to buy a car in the upcoming year.

Student Loans

If you have a Federal student loan, your rate is fixed and will not be affected by the rate increase.  However, if you obtained a private loan to help you pay for college, then you’ll need to consult with your lender to find out if the Fed action will impact your loan.

Savings Accounts

Don’t plan on your bank passing along any extra interest to your savings account as a result of rate bump.  It could happen, but is probably unlikely.  Talk to your banker about the best options for earning interest on your savings.


If you have any questions regarding the rate hike or any other aspect of mortgage lending, feel free to contact me any time at (425) 241-1922 or

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