The Federal Reserve's recent decisions have led to a surge in interest rates, affecting multiple areas of the economy such as credit cards, car loans, mortgages, and student loans. The benchmark rate has been adjusted to a range of 5.25 to 5.5 percent to control inflation, which has been accelerating due to rising gas prices. This high-rate period is expected to continue due to persistently high prices.
Consumer credit card rates, which are closely tied to the Fed's actions, have seen a rapid increase over the past year. As of July 19, the average credit card rate was at 20.44 percent, a significant rise from around 16 percent in March of the previous year when the Fed initiated its cycle of rate hikes.
The auto industry, particularly the used-car market, has also felt the impact of these higher loan rates. Qualifying for car loans has become more challenging compared to last year due to increased costs and sustained high prices. As of August, new car loans had an average rate of 7.4 percent, while used car loans had an even higher average rate of 11.2 percent.
In the housing sector, mortgage rates have risen to their highest levels since 2002. As of September 14, the average rate on a 30-year mortgage was 7.18 percent, up from 6 percent for a similar loan during the same week in 2022. Other home loans such as home-equity lines of credit and adjustable-rate mortgages generally rise within two billing cycles after a change in the Fed’s rates.
Federal student loans remain unaffected by the Fed's actions as they carry a fixed rate set by the government. However, new federal student loans disbursed after July 1 will carry a higher interest rate of 5.5 percent, up from 4.99 percent for loans disbursed in the previous year. Graduate students and parents will also pay about half a point more than the rate a year earlier, averaging around 7.05 percent and 8.05 percent respectively.
However, savers have benefited from the surge in interest rates. Rates on online savings accounts and one-year certificates of deposit have reached their highest levels in over a decade. The average yield on an online savings account was 4.39 percent as of September 1, up from 1.8 percent a year ago. Rates on certificates of deposit have also been increasing, with the average one-year C.D. at online banks being 5.1 percent as of September 1, up from 2.67 percent a year earlier.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.