NewsMaking It In San Diego


Fed rate hike could mean opportunities for savers

Posted at 4:57 PM, May 04, 2022
and last updated 2022-05-04 20:52:10-04

SAN DIEGO (KGTV) — The Federal Reserve's rate hikes could soon add up to give savers long-awaited interest on their cash, even as they price people out of the region's tight housing market.

San Diego Realtor David Spiewak's savings account isn't doing much for him these days, making him about 35 cents a month. But real estate is another story.

"I bought an investment property and I've owned it for a year and a half and it's gone up 160K," he said. "And it was literally a walk-in closet studio in North PB."

But getting into San Diego's housing market is getting even harder. In response to inflation at levels not seen in 40 years, the Federal Reserve on Wednesday hiked its key interest rate by half a percent. In other words, first time homebuyers are losing buying power because they can't qualify for as big of a mortgage.

"I have clients, we were looking in the $700,000 range, we've kind of moved down to the $575,000-$600,000," Spiewak said.

But the Fed's move is also giving San Diegans a new opportunity to let their money work for them.

Bankrate senior industry analyst Ted Rossman said liquid savings account rates could be as much as three percent by year's end for online banks.

"Everybody needs emergency savings, this could represent hundreds of dollars of annual interest on a $10,000 balance," Rossman said.

Also on Wednesday, the U.S. Treasury announced its risk-free bonds tied to inflation would pay a whopping 9.62 percent for the next six months, though strings are attached.

Investors can buy up to $10,000 year, but can't cash out for 12 months. Plus, they face a penalty if they sell the bonds before five years, and could see their profits plummet if inflation drops, which is the Fed's goal.