The autumn of 2016 has brought about many changes in our country. Some anticipated and planned, like our recent Presidential election, with the result being favorable for the winning party and conversely a surprise to the other. Or the Chicago Cubs winning the World Series!
Another recent change widely anticipated by the financial community was the Federal Reserve announcement to raise interest rates. They voted to raise the range on the Federal funds rate to .50% and .75% respectively.
Fed Rate Hike
What does that really mean for borrowers and savers? Let’s take a look.
One of the more immediate impacts will be on credit cards. Check your credit card paperwork for specifics but most cards have variable rates and generally will occur within one or two billing cycles.
Variable rate mortgages will see increases but as with credit cards, the details are in your paperwork. Fixed rate mortgages should remain fixed, but check your documents to be sure.
The rate changes might be small but on large mortgage balances, this change can have a larger impact.
In general, Federal student loans are fixed and similar to fixed mortgages should have no change. From a marketing perspective, car loans tend to lag the Federal rate hikes. If you have a current car loan that is fixed, it will remain fixed. Check your loan documents to be sure.
According to an article by Ethan Wolff-Mann at Yahoo Finance quoting Mark Hamrick, senior economic analyst at Bankrate.com, “the most immediate impacts from the Federal Reserve decision to hike rates will be felt more among borrowers than for savers.” There is a delay in the deposit rates and according to Hamrick, the delay is to the fact that a savings account is essentially a marketing tool. “Banks adjust the yields based on the need to grow that deposit base. In turn, that money gets turned back into the economy through lending function of loan demand” In the near term, short-term CD’s will see higher yields.
As the Dow approaches or exceeds 20,000, and a new President steps in, it appears that all the old norms have been broken. At least as it affects the stock market. Read more about that in my previous article posted before the election!
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Happy New Year!
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