Fed Raises Interest Rates Again – What This Means for Your Loans


On Wednesday, March 21st, The Federal Reserve raised interest rates (prime rate) by a quarter percent. For people with a traditional 30-year fixed, this has no effect on their loan. But it could affect those who have ARM loans that are adjusting, equity lines of credit and credit cards. Those loans are tied to the prime rate, and will see the actual increase show up within 60 days.

Items such as mortgages and credit cards are benchmarked against the prime rate, and banks are in charge of implementing such Fed Rate changes. Higher rates have already begun hitting the housing market, and though still low by historical standards, mortgage rates are on the rise at a time when inventory of affordable houses is low.

You may see an increase in your monthly payments if you have an adjustable-rate mortgage that is maturing, a home equity loan, or balances on credit cards. Furthermore, with the new tax changes that have occurred, the interest you pay on Home Equity Lines of Credit (HELOC’s) are no longer a tax deduction. Given that information, now may be a good time to consider refinancing into a 30-year mortgage to avoid this increase in payment or to consolidate your 1st and 2nd mortgage into one affordable fixed payment.

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