What’s new?
- The baseline federal interest rate is between 5.25 and 5.5%, a 22-year high – with additional increases likely in the future.
- Average annual percentage rates (APR) on new credit cards are also at a two-decade high.
- The Federal Reserve has increased interest rates to reduce inflation, and their efforts are proving successful.
- However, rising interest rates are contributing to a similar rise in credit card debt, with Maryland ranking fourth among states with the most debt.
SECU’s quick tips for dealing with high interest rates
What not to do…
- Open new credit cards: If you must, go for competitive rate options like a credit union.
- Add to your debt: Tackle your debt strategically with guidance from a SECU financial expert.
What to do…
- Build a safety net: Plan as much as you can, and build a cushion to support you when the unexpected happens. SECU can help! Even a small plan can act as a springboard to achieving your financial goals.
- Prioritize debt repayment: Any excess cash should go towards reducing high-interest debt. Don’t think you have any excess? SECU member advisors accept your challenge. Schedule a financial wellness checkup for guidance navigating this challenging economic environment.
Go deeper: This blog breaks down exactly what you should expect for the next few months and how to adjust your finances accordingly.
How the federal reserve rate hikes affect your finances
The Federal Reserve interest rates, also known as the federal funds rate, influence every aspect of your finances – from how much it costs to borrow money, to the rate at which your savings accrue, to overall economic conditions.
Here’s where you can expect to feel the impact of the federal reserve interest rates hike…
Loans and credit card rates on the rise 📈
Federal interest rates directly impact annual percentage rates (APR) on lending products, including mortgages, auto loans, credit cards, personal loans, and more.
Average interest rates on top borrowing options
How will the Fed rate hike affect mortgage rates?
It’s important to remember that while Federal interest rate changes do influence mortgage rates, they are not the sole determinant. Economic conditions, inflation expectations, and other factors also play a role in shaping mortgage rate trends. If you’re in the market for a home purchase or considering refinancing, staying informed about mortgage rate trends can help you make well-informed decisions.
| Average mortgage rates in Maryland (based on a $300,000 loan with a 20% down payment and strong credit score) | |
| 30-year fixed | 7.9% |
| 15-year fixed | 6.98% |
| 10/6 adjustable-rate | 7.55% |
What about auto loans?
Car prices have risen rapidly in the past couple years, but data shows prices have started to calm. Though inflation is cooling, car prices increased roughly $12,000 in just five years. Increasing customizability and limited supply of used cars is largely to blame.
| Average auto loan interest rates | ||
| Credit score | New cars | Used cars |
| 579 or below | 14.08% | 21.32% |
| 580-619 | 11.53% | 18.55% |
| 620-659 | 8.86% | 13.28% |
| 660-719 | 6.40% | 8.75% |
| 720 or above | 5.18% | 6.79% |
Source: Experian
And credit cards?
When the Fed raises interest rates, credit card interest rates tend to follow suit. The average credit card APR was 22.39% in the second quarter of 2023, the highest rate in twenty years. If you’re concerned about the impact of higher rates on your credit card debt, consider focusing on paying off balances, using credit cards responsibly, and exploring options to minimize interest charges.
Increasingly competitive savings rates
Leverage federal interest rate hikes and competitive credit union annual percentage rates (APR) to maximize your savings potential. When interest rates are high, credit unions like SECU offer unique savings opportunities designed to help members take advantage of the current interest rate climate. This means your money can earn more interest over time, potentially leading to better returns on your savings.
Savings options for every need from SECU
- Share Savings ($10 minimum deposit)
Our traditional savings account. Earn a competitive interest rate with unlimited deposits and withdrawals.
- Money Market
Higher interest rates than a traditional savings account and greater flexibility than a CD. Enjoy easy access to funds with greater rates of return.
- Certificates of Deposit
Earn top interest rates on CDs with terms from 3 months to 5 years. Lock in a great rate with a low $500 minimum deposit.
Explore the difference between share savings, money market, and CDs to match your savings with your financial goals.
Investing, retirement and rising interest rates
Changes in interest rates should influence investment decisions. Higher interest rates can lead to better yields on retirement savings vehicles like IRAs and 401(k)s. Conversely, they can also affect the prices of assets like bonds and stocks, influencing investment choices.
For example, when interest rates rise, bond yields may increase, potentially making them more attractive to investors seeking fixed income. Stock markets can also react to changes in interest rates, affecting investment portfolios.
Get expert support navigating evolving economic conditions for your investment portfolio with SECU Financial Partners. Our dedicated team of SECU Financial Partners consultants are experienced, attentive, and (most importantly) really good at listening. We understand that making long-term decisions about money can often be daunting and overwhelming. See how we can help you with…
How fed interest rates impact everyday budgeting
Federal interest rate hikes can have a compounding impact on your budget. Loan payments, credit card interest rates, and housing costs are just a few areas directly impacted by changes in federal interest rates.
Although inflation has fallen from its peak of 9% in June 2022, Marylanders are feeling the strain of rising interest rates on their budgets. In fact, studies show that Maryland ranks fourth among states with the highest rates of credit card debt. The average Maryland borrower carries $4,190 in debt.
As credit card debt rises, borrowers will spend more on interest and fees. Schedule a financial wellness checkup for expert support as you review and adjust your budget to accommodate interest rate increases.
Balancing your budget in light of interest rate hikes
- Identify areas most affected by rising interest rates
- Focus on paying down high-interest debts to minimize the impact of rate hikes
- Build a safety net to maintain financial stability
- Consider refinancing adjustable rate loans to a fixed-rate to avoid potential future rate hikes
Adapting to interest rate changes requires careful planning and flexibility in your budget. By proactively managing the impacts of rate hikes, you can maintain financial stability and make informed decisions about your finances.
Gain stability in any economic environment with SECU
The Federal Reserve’s decisions regarding interest rates are based on a variety of economic factors and are designed to mitigate inflation. An increase of less than 1% can have far-reaching effects on individuals’ finances.
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