Record-low mortgages are long gone. Credit card rates will likely rise. So will the cost of an auto loan. Savers may finally see a noticeable return. The unusually large three-quarter point hike in its benchmark short-term rate that the Federal Reserve announced Wednesday won’t, by itself, have a huge effect on most Americans’ finances. But combined with earlier rate hikes and additional large increases to come, economists and investors foresee the fastest pace of rate increases since 1989. The result is increasingly higher borrowing costs as the Fed fights the most painfully high inflation in four decades and ends a decades-long era of historically low rates. Chair Jerome Powell hopes that by making borrowing more expensive, the Fed will succeed in cooling demand for homes, cars and other goods and services and slow inflation. Yet the risks are high. With inflation likely to stay elevated, the Fed may have to drive borrowing costs even higher than it now expects. A series of higher rates could tip the U.S. economy into recession. That would mean higher unemployment, rising layoffs and continued pressure on stock prices. How will it affect your finances? These are some of the most common questions being asked about the impacts of the rate hike. I’M CONSIDERING BUYING A HOUSE. WILL MORTGAGE RATES KEEP GOING UP? Rates on home loans have soared in the past few months, mostly in anticipation of the Fed’s moves, and will probably keep rising. Mortgage rates don’t necessarily move up in tandem with the Fed’s rate 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 include investors’ expectations for future inflation and global demand for U.S. Treasurys. For now, though, faster inflation and strong U.S. economic growth are sending the 10-year Treasury rate up sharply. As a consequence, the national average for a 30-year fixed mortgage has jumped from 3% at the start of the year to well above 5% now. In part, the jump in mortgage rates reflects expectations that the Fed will keep raising its key rate. But its forthcoming hikes aren’t likely fully priced in yet. If the Fed jacks up its key rate even higher, as expected, the 10-year Treasury yield will go much higher, too, and mortgages will become more expensive. WILL IT STILL BE TOUGH TO FIND A HOUSE? If you’re looking to buy a home and are frustrated by the lack of available houses, which has triggered bidding wars and eye-watering prices, that may get a little easier soon. Economists say that higher mortgage rates will discourage some would-be purchasers. And average home prices, which have been soaring at about a 20% annual rate, could at least rise at a slower pace. Sales of existing homes have fallen for six straight months. New home sales have also slumped. Those trends are modestly boosting the supply of available properties. I NEED A NEW CAR. SHOULD I BUY ONE NOW? Fed rate hikes can make auto loans more expensive. But other factors also affect these rates, including competition among car makers that can sometimes lower borrowing costs. Rates for buyers with lower credit ratings are most likely to rise as a result of the Fed’s […]

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