The Federal Reserve paused its relentless campaign of interest rate hikes today for the first time in 15 months.
But will consumers even feel the benefit? Officials have raised rates on 10 consecutive occasions since last year – the fastest pace of tightening since the 1980s.
It means households are still suffering under the largest borrowing costs they’ve seen in years. A pause will only stave off further misery.
What’s more, officials warned that it could raise rates twice more this year.
Today the federal funds rate hovers between 5 and 5.25 percent. This figure is effectively the interest rate at which firms borrow and lend to each other overnight.
This is not the rate of interest that the consumer pays but fluctuations in it does have a knock-on effect on mortgage payments, credit card loans and savings yields.
Here Dailymail.com breaks down how this figure has already impacted household budgets.
Dailymail.com breaks down how relentless interest rate hikes have burnt a hole in household budgets
The Fed said it would hold rates steady between 5 and 5.25 percent, following ten consecutive hikes since March 2022
Credit cards
The majority of credit cards offer a variable interest rate – which changes in-line with the Fed’s benchmark figure.
Data from the central bank shows that the average credit card APR is now 20.92 percent, up from around 16 percent last March.
Until recently, it was rare to see average interest rates on credit cards above 20 percent.
However some lenders have started to slow their own hikes significantly. And many cards marketed at borrowers with good to excellent credit cap APRs at between 29.99 percent and 30.99 percent.
Anybody with large credit card debts should therefore use this rate pause to focus on paying down their balances.
The Fed has already warned that rates could rise two more times before the end of the year meaning it could be wise to get ahead of your debts now.
The average credit card rate is now 20.92 percent, up from around 16 percent last March
Experts also recommend negotiating the APR charged by your card provider.
Recent data from Lending Tree shows more than three in four cardholders who asked for a lower interest rate on one of their cards were granted the request.
Mortgage Rates
Volatile mortgage rates have been one of the most talked-about consequences of economic turmoil in the last year and a half.
Rates on a 30-year fixed-rate mortgage are not tied by the Fed’s funds rate but by the yield on 10-year Treasury bonds.
Such yields are influenced by inflation, Fed actions and the response of investors.
According to data from Freddie Mac, the average rate on a 30-year mortgage is 6.71 percent. This is up one whole percentage point since this time last year when it was 5.23 percent.
The average 30-year fixed-rate mortgage is now 6.71 percent, up from 5.23 percent last year
And it is only slightly lower than last October’s peak rate of 7.12 percent.
Mortgage rates are now likely to remain stable in the immediate future. But if the Fed delays hiking rates again – and implements a longer-term pause – home loans could finally start to fall.
Savings Rates
Hikes to the Fed’s benchmark rate should in theory spell good news for savers, with banks likely to pay larger interest on deposits.
But this can be slow to come into effect. Federal Reserve data shows that the average savings rate is now 0.4 percent.
However it’s not all doom and gloom: a host of online firms now offer extremely competitive rates up to five percent.
Data from DepositAccounts.com cited in the New York Times found that the average yield on an online account was now 3.98 percent. This was up from 0.73 percent a year ago.
And today it emerged that Walmart-backed firm One is offering its customers a competitive five percent rate – more than 12 times the average offered by mainstream banks.
Many online savings accounts are offering competitive rates up to 5 percent
It means savers stand to make $460 more in interest on a $10,000 deposit with a One account than they would with an average bank in their first 12 months.
It followed in the footsteps of Apple which recently launched a 4.15 percent deal.
Car loans
The cost of owning a vehicle has also shot up in-line with wider economic turmoil.
The average rate on a new car loan was 7.1 percent in May, according to data from Edmunds.com. This was up from 5.1 percent last year.
Meanwhile loans for used vehicles are even higher at 11 percent – an increase from 8.2 percent last year.
How much borrowers are charged depends on their credit history, loan term, downpayment and the type of vehicle.
A report by Cox Automotive found that the number of motorists behind on their auto-loan payments by more than 60 days had shot up by 26.7 percent towards the end of last year.
