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Rates on short-term credit, such as credit cards, will likely rise at the same pace as interest rates. But the link to long-term rates, such as mortgages, isn\u2019t as clear.<\/span><\/span><\/p>\n<\/div>\n WASHINGTON (AP) \u2013 Will mortgage rates go up? How about car loans? Credit cards? How about those nearly invisible rates on bank CDs \u2013 any chance of getting a few dollars more?<\/span><\/span><\/p>\n With the Federal Reserve signaling Wednesday that it will begin raising its benchmark interest rate as soon as March \u2013 and probably a few additional times this year \u2013 consumers and businesses will eventually feel it.<\/span><\/span><\/p>\n The Fed\u2019s thinking is that with America\u2019s job market essentially back to normal and inflation surging well beyond the central bank\u2019s annual 2% target, now is the time to raise its benchmark rate from near zero.<\/span><\/span><\/p>\n The Fed had slashed its key rate after the pandemic recession erupted two years ago. The idea was to support the economy by encouraging borrowing and spending. But now, by making loans gradually costlier, the Fed hopes to stem the surging price increases that have been squeezing consumers and businesses.<\/span><\/span><\/p>\n Here are some questions on what this could mean for consumers and businesses.<\/span><\/span><\/p>\n Probably, but it\u2019s hard to say. Mortgage rates don\u2019t usually rise in tandem with the Fed\u2019s rate increases. Sometimes they even move in the opposite direction. Long-term mortgages tend to track the rate on the 10-year Treasury, which, in turn, is influenced by a variety of factors. These include investors\u2019 expectations for future inflation and global demand for U.S. Treasurys.<\/span><\/span><\/p>\n When inflation is expected to stay high, investors tend to sell Treasurys because the yields on those bonds tend to provide little to no return once you account for inflation. As that happens, the selling pressure on the bonds tends to force Treasurys to pay higher rates. Yields then rise in response. The result can be higher mortgage rates. But not always.<\/span><\/span><\/p>\n Not necessarily. Inflation is far exceeding the Fed\u2019s 2% target. Fewer investors are buying Treasurys as a safe haven. And with numerous Fed rate hikes expected, the rate on the 10-year note could rise over time \u2013 and so, by extension, would mortgage rates.<\/span><\/span><\/p>\n It\u2019s just hard to say when.<\/span><\/span><\/p>\n On the other hand, even when Treasury yields are comparatively low relative to inflation, as they are now, investors often still flock to them. That\u2019s especially true at times of global turmoil. Nervous investors from around the world often pour money into Treasurys because they are regarded as ultra-safe. All that buying pressure tends to keep a lid on Treasury rates, which generally has the effect of keeping mortgage rates relatively low.<\/span><\/span><\/p>\n For users of credit cards, home equity lines of credit and other variable-interest debt, rates would rise by roughly the same amount as the Fed hike. That\u2019s because those rates are based in part on banks\u2019 prime rate, which moves in tandem with the Fed.<\/span><\/span><\/p>\n Those who don\u2019t qualify for such low-rate credit card offers might be stuck paying higher interest on their balances, because the rates on their cards would rise as the prime rate does.<\/span><\/span><\/p>\n The Fed\u2019s rate hikes won\u2019t necessarily raise auto loan rates. Car loans tend to be more sensitive to competition, which can slow the rate of increases.<\/span><\/span><\/p>\n Probably, though it would take time.<\/span><\/span><\/p>\n Savings, certificates of deposit and money market accounts don\u2019t typically track the Fed\u2019s changes. Instead, banks tend to capitalize on a higher-rate environment to try to thicken their profits. They do so by imposing higher rates on borrowers, without necessarily offering any juicer rates to savers.<\/span><\/span><\/p>\n\nI\u2019m considering buying a house. Will mortgage rates go steadily higher?<\/span><\/span><\/h3>\n
Does that mean home-loan rates won\u2019t rise much anytime soon?<\/span><\/span><\/h3>\n
What about other kinds of loans?<\/span><\/span><\/h3>\n
Would I finally earn a better return on CDs and money market accounts?<\/strong><\/span><\/span><\/h3>\n