Interest Rates Increased 0.25%!

Janet Yellen and the Federal Reserve raised interest rates by a quarter percent (0.25%) on Wednesday, March 15th.  How do this impact you?  Take a look below…

The Positives of a Rate Hike

1. Certificate of Deposits (CDs)

   • For those that are not familiar with CDs, they are certificate of deposits where you set aside a portion of money for a fixed period of time and earn interests off it.  Check out NerdWallet’s tool to find the best CD rate
   • Expect to see a small increase in CD rates.

2. Savings Accounts

   • Savings account interest rates are unlikely to reflect the rate hike immediately, but you can expect to see a small increase in rates throughout the year.
   • If you haven’t already, consider moving a portion of your savings into a high interest rate savings account (Yes, unfortunately 1.00% is considered high these days)

The Negatives of a Rate Hike

1. Mortgage Loan

   • A rate hike of a quarter percent may not sound like a big deal, but when you calculate the difference of a 4% and 4.25% on a $200,000, 30 year fixed mortgage, you’re talking a difference of $11,000 once each loan .  Check out the mortgage calculator to test this out.
   • If you are looking to purchase a new property, try to lock in a rate as soon as possible, as the Fed has expressed interest to raise rates another half a percentage point!
   • If you have a variable interest rate loan, consider refinancing to lock in a lower rate.

2. Student Loans

   • Yes, unfortunately, this rate hike affects students loan.
   • For folks who have variable interest rates, expect to see an increase in monthly payments.
   • If you are looking to refinance your loan to lock in a lower rate, do so as soon as possible as it is very likely we will see more rate hikes in 2017.
   • If you are applying for a student loan, shop around for the best rate and look for a fixed rate loan.  With the variable interest rates you run the risk of rate hikes and having to face higher monthly payments

3. Credit Cards

   • Your credit card interest rates will increase.  This means if you are paying the minimum monthly payments, the time to pay off your balance will take longer.
   • Hopefully you shouldn’t have credit card debt as you should treat your credit card as a debit card.  Check out the post on Use a Credit Card Instead of Your Debit Card

4. Car Loans

   • Purchasing a new car?  Expect to see higher rates for your car loans.
   • If you locked in a fixed rate car loan for one you currently own then your ok.  If you have a variable interest rate loan expect to see higher monthly payments.