The Federal Reserve recently announced that it is raising its key interest rate by a quarter of a point, to a range of 2.25 to 2.5 percent. That marks the fourth hike this year and lifts the benchmark rate to its highest point since 2008. But the Fed indicated it only anticipates two hikes for the year ahead.
Greg McBride, chief analyst at Bankrate, says borrowers already felt the pinch from higher rates and will see the effect of the latest hike soon.
“They are feeling the impact, and unfortunately, whether the Fed raises rates once, twice or three times, borrowing rates are going to go up,” McBride said.
People who have variable rate debt, like credit cards, will see it first. A quarter of a point increase by the Fed could be reflected as soon as one to two statement cycles later. To avoid taking a hit, pay down your debt aggressively. If you have a variable rate home equity line of credit or adjustable rate mortgage, see if you can move to a fixed rate.
“Your best defense is a good offense,” McBride said. “Take steps to insulate yourself from further rate hikes.”
On the flip side, if you are able to save, you can make a bit more off that money. It pays to shop around as many banks are offering around 2.4 percent on basic savings accounts these days. McBride noted that this is the first time in roughly a decade that savers can earn more on savings than the rate of inflation.