The Federal Reserve lifted its benchmark short-term interest rate.  As a result, we are all playing dominoes!  To put it simply, the rate hike of 25% of a percentage point is “likely to have a domino effect across the economy as it gradually pushes up rates for everything from mortgages and credit card rates to small business loans.”

The Domino Effect:  Short-term Interest Rate Hits Consumer Wallets

The short-term interest rate hike will affect you—eventually, as a consumer.

In Orlando, Short term interest rate hikes won't hurt you--yet!

Short-term Interest Rates: Explained by Palm State Mortgage Company!

Below you will find the Palm State Mortgage Company Short List of Consumers who will feel the impact of this fiscal “domino:”
1.  Got Cards?  Pay Them!
Tops on the list of painful pinch in the wallet is the consumer with credit card debt! Greg McBride, analyst at Bankrate.com. stated, “These interest rate hikes could add up to hundreds of dollars per month in extra fees for credit card…”

He added that “it’s the cumulative effect that’s important, especially since the Fed already raised rates in December 2015 and December 2016.”  By the way, your bank card might not even tell you it’s going up!  Be aware, and make your plans.

2. Considering an ARM? Think Again.
Likewise, borrowers who have an adjustable “rate mortgage and HELOC borrowers,” will also feel the impact.  If you already have an ARM, you will feel the pain—at least a little.

Short-term interest rates hiked by Feds should not rob you of dreams. Save accordingly .

Short-term Interest Rates are Going Up Save instead of Charge!

Got an ARM already?  Nerdwallet advises us this way:  It might be time to move to a fixed rate loan.  They say,”You may want to begin the mortgage shopping process soon if you intend to stay in your home for a few years.”

A.      You usually expect an annual modification.

B.      However, the next reset might embrace not one but two or three rate hikes. Be fiscally ready!

C.      For example, if you are paying on a $200,000 mortgage, you could see your payment jump by as much as $84.00.  Palm State advises you to be fiscally ready.

Mortgages:  The Indirect Effect of Short-term Rate Hikes

The Fed’s key short-term rate actually affects mortgages and other long-term rates indirectly.  For example, the week that the financial world anticipated the hike caused a 2017 record high with the average jumping to 4.21%.  Last year at this time, Freddie Mac announced the average 30 year mortgage rate was a lowly 3.68%.

If you are shopping for a home this spring, Palm State Mortgage Company brings you good news:  This most recent rate hike should not really hurt you.  It was well anticipated, and the financial world was well prepared for the short-term loan rate hikes.  Expect also that there could be at least one  25% of a point boost sometime this year.

The Real Perspective

To put this in perspective, the mortgage payment on a home of $200,000 would be increased only by about $30.  Nerdwallet puts it this way:  “As of mid-March, 30-year fixed rates are topping 4.5%.  Considering a $300,000, 30-year fixed rate mortgage, each half-point increase adds close to $100 a month to your payment.”  Keep in mind, the Feds could raise the rates two more times this year.

However, some economists are very encouraging for new homeowners.  “Brad Hunter, chief economist for Home Advisor, a home improvement referral site, has expected two or three additional Fed rate hikes in 2017, and that mortgage rates would only gradually move higher throughout the year.”

Short-term Interest Rates don't hurt savers. Piggy Bank under Palms Shows Smart Saving.

Short-term Interest Rates don’t hurt savers. Piggy Bank under Palms Symbolizes Smart Saving. 

Economists at USA Today warn, “Revolving loans with variable rates, such as credit cards and home equity lines of credit, will become more expensive since they feel the most immediate impact from an increase in the Fed’s key short-term rate.”

In case you haven’t noticed, average credit card rates are about 16.26%, while home equity lines are about 5.21%, according to Bankrate.com.

There are other factors to consider when you look at our socio-political-economic future.  For example, USA Today reports, “If Congress fails to approve President Trump’s fiscal stimulus, long-term rates could fall regardless of the Fed, while a faster-growing economy and higher inflation could drive up borrowing costs faster.”