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The Federal Reserve Hikes Interest Rates for a 2nd Time in a Decade

Federal ReserveInterest rates: what does the hike mean for your wallet?

By now you might know the Federal Reserve has raised interest rates by a quarter of a percentage point: the 2nd rate hike in about ten years. According to the Washington Post, the Fed’s rate hike will affect anyone with a home mortgage, car loan, savings account or money in the stock market.
“We expect that the 10-year Treasury rate will stay below 3% through the end of 2018,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association, “and 30-year mortgage rates will stay below 5% over the same period.”
The article says analysts predict the biggest lesson is that a single rate increase on its own may not make much of a difference to your own bottom line. Plus, if the Fed continues moving slowly, it may be years before you see another rate hike. But don’t get too excited, the article says if officials raise the key short-term rate more regularly, the effects could be dramatic. And it looks like that will happen because projections show the Fed is expected to raise rates three times next year, which would bring the benchmark rate up to 1.4% by the end of 2017.
Here’s what the newspaper says the current rate hike means for your wallet:
1) Mortgages
History shows there’s actually very little correlation between the Fed’s benchmark interest rate and 30-year fixed-rate mortgages. However, mortgage rates are more closely tied to the rates on long-term bonds, such as the 10-year Treasury bond, which can go up and down for a number of reasons. Rates have been rising since the election. The average rate on 30-year fixed-rate loans went from 3.47% in late October to 4.13% last week.
2) Auto loans
The second rate hike from the Fed shouldn’t have much of an impact on the price of a car. What most people find drives the cost of their car is not what the Fed does but whether they have good negotiation skills. If you’re interested in buying a car via email, read this.
3) Credit cards 
Everyone will feel the rate hike right away with their credit cards because the Fed’s decisions directly affects the rates on credit cards. You will see the recent hike in the next one or two statement cycles.
4) Savings accounts
This rate increase probably won’t make any difference to your savings account.
The best way to find better yields on savings accounts is to shop around and compare rates from credit unions, small banks and online banks.
So, what does the federal Reserve interest rate hike mean for you? If you’re considering buying or selling a home in Montecito, Hope Ranch or any of Santa Barbara’s upscale communities, chances are there’s no better time than right now. Call me at 805.886.9378 or email me at Cristal@montecito-estate.com and we’ll begin your real estate search. I am also here to help homeowners sell their property using my tried and true marketing strategy. Let’s get moving before the Federal Reserve decides to do more rate hikes!

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