HOUSTON - The Fed hiked interest rates half a percent Wednesday, the largest increase in more than 20 years.
Consumers planning to buy a home or car, or who have credit card debt, are about to pay a lot more in interest. The Fed is expected to increase rates several more times over the next couple of years.
To curb inflation, the Fed first raised interest rates .25% in March, and now another .50%.
"Mortgage interest rates are rising, credit card rates are rising, auto loans, all other interest rates, and loans will be rising," said Dr. Christopher Clarke, Instructional Assistant Professor of Economics at the University of Houston.
Lending Tree reports interest rates increased on about 75% of credit cards after the March rate hike. On $10,000 dollars in credit card debt, every increase of .25% costs you $50 more a year. The average interest now is nearly 17% APR.
"It’s probably going to get up to close to 20% by the time the Fed is done raising rates. It seems like that’s not a lot of money, but it could be $10 to $15 more a month," said Paul Oster, CEO of credit repair firm Better Qualified.
Auto loans are not expected to rise as quickly as other loans, because they're more sensitive to competition for buyers.
But mortgage rates are expected to keep climbing. They've already risen from 3.5% to more than 5% over the last year for a 30-year fixed-rate mortgage. On a $250,000 home, that's an extra $3,300 a year, according to the National Association of Realtors.
"We’re talking hundreds of dollars a month in interest payments for housing," said Clarke.
Financial experts advise consumers to pay down as much debt as possible and improve their credit scores.
"Never before has it been more important. Your credit score is either going to cost or save you money every single month. And as interest rates go up, that becomes more and more prominent," said Oster.
"The silver lining is that your savings account might get a little higher return, no?" said Clarke.
As much as these rate hikes might hurt your wallet, economists do not expect them to climb to the highest rate of 16.6%, which was set to curb inflation in 1981.