Higher mortgage rates have sent home sales tumbling. Credit card rates have grown more burdensome, and so have auto loans. Savers are finally receiving yields that are actually visible, while crypto assets are reeling. The Federal Reserve’s move Wednesday to further tighten credit raised its benchmark interest rate by a sizable 0.75 percentage point for a second straight time. The Fed’s latest hike, its fourth since March, 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. The Fed’s actions have ended, for now, an era of ultra-low rates that arose from the 2008-2009 Great Recession to help rescue the economy — and then re-emerged during the brutal pandemic recession, when the Fed slashed its benchmark rate back to near zero. Chair Jerome Powell hopes that by making borrowing more expensive, the Fed will succeed in slowing demand for homes, cars and other goods and services. Reduced spending could then help bring inflation, most recently measured at a four-decade high of 9.1%, back to the Fed’s 2% target. Yet the risks are high. A series of higher rates could tip the U.S. economy into recession. That would mean higher unemployment, rising layoffs and further downward pressure on stock prices. How will it all affect your finances? Here are some of the most common questions being asked about the impact of the rate hike: ___ I’M CONSIDERING BUYING A HOUSE. WHAT’S HAPPENING WITH MORTGAGE RATES? Higher interest rates have torpedoed the housing market. Rates on home loans have nearly doubled from a year ago to 5.5%, though they’ve leveled off in recent weeks even as the Fed has signaled that more credit tightening is likely. 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. Investors expect a recession to hit the U.S. economy later this year or early next year. This would force the Fed to eventually cut its benchmark rate in response. The expectation that the Fed will have to reverse some of its hikes next year has helped reduce the 10-year yield, from 3.5% in mid-June to roughly 2.8%. WILL IT BE EASIER TO FIND A HOUSE? Sales of existing homes have dropped for five straight months, while new home sales plunged in June. If you’re financially able to go ahead with a home purchase, you’re likely to have more choices than you did a few months ago. In many cities, the options are few. But the number of available houses nationwide has started to rise after falling to rock-bottom levels at the end of last year. There are now 1.26 million homes for sale, according to the National Association of Realtors, up 2.4% from a year ago. I NEED A NEW CAR. SHOULD I BUY ONE NOW? The Fed’s rate hikes typically make auto loans more expensive. But other factors also affect these rates, […]

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