The Federal Reserve’s latest interest rate hike is already changing the math for investors.
Getting a mortgage, car loan or credit card is more expensive today than on Monday after mortgage rates had their most significant one-week jump in 35 years.
Freddie Mac said the average rate on a 30-year fixed-rate mortgage is 5.7%. Average monthly payments for new and used cars are now at their highest levels on record, according to tracking from Edmunds,
With rising interest rates, experts suggest you should try to pay down debt as quickly as possible, especially if they have a variable interest rate.
“There are some things we just can't live without, like food and with gas,” said business journalist Marc Stewart. “If there's one area where perhaps you can have some strength or influence, it's on anything involving credit, like your credit card bills. Your credit card rates are going to be going higher so if you can take care of that now, do so.
“It’s not something that you want to have linger, especially with the potential of more interest rate hikes to come.”
Almost every 401k has lost 10% or more of its value since the start of the year. Most analysts say to look at what's available but don't make a major decision based on panic.
“We wouldn't recommend folks look to the market with something like a 12-month time horizon, right?” said Jason Moser, an adviser at the Motley Fool. “We want folks who are investing to be able to commit money to the market that they know they can commit for at least 3 to 5 years if not longer. So, if you're looking for a place, a short-term place to park your money, definitely a savings account looks more attractive these days as rates start to go up.
“It is worth noting though, that even still with those rates rising over time, that money is still losing value in that savings account because of inflation still because with inflation still high at these high levels.”
Federal Reserve leaders said the goal of the interest rate hike is to stop inflation, but that won't happen immediately. The most generous projections say inflation might return to the normal 2% range by 2024.