10News talks with Bankrate.com CFA Greg McBride.
10News talks with an expert from Greenpath Funding.
SAN DIEGO (KGTV) - The Fed’s decision to raise interest rates was followed by a drop on Wall Street and concerns about mortgages, credit cards and other borrowing.
The federal funds rate now stands between 1.75 and 2%. A higher rate makes it more expensive for banks to borrow money, which can translate into higher borrowing rates for consumers.
It’s not all bad news, says Mortgage Loan Originator Manny Cien of Greenpath Funding. The Fed’s ultimate goal is to manage the nation’s economy to the best advantage, Cien says.
The rate hike is also good news for retirees, according to Greg McBride, Chief Financial Analyst of Bankrate.com.
“This is a more positive environment for a lot of retirees than what they’ve seen in the past ten years when interest rates were just abysmally low,” says McBride.
RELATED: Federal Reserve announces interest rate hike
He adds that consumers with savings and money market accounts and certificates of deposit should shop around to look for the best returns on the money.
Homebuyers may be concerned about the rate hike, but it doesn’t directly affect mortgages, Cien says, adding that investors had already priced Wednesday’s hike into the market.
“Yes, it does further squeeze affordability, but the broader economic environment is what gets people to buy houses,” McBride says.
Both financial experts agree the most substantial impact will be on anyone with variable rate debt, including credit cards, home equity lines of credit, and adjustable rate mortgages.
Consumers will see the higher rate reflected typically within two statement cycles, so within the next 60 days, says McBride.