In September 2018, the Federal Reserve announced a 25-basis-point increase in the federal funds rate to 2.25 percent, the eighth rate hike in two years. The hikes are expected to have an impact on rates for mortgages and other debt, as well as consumer spending, which lessens as interest rates rise.
Rate hikes affect consumer debt, especially variable debt, whose interest rate is directly tied to the Fed’s funds rate. Mortgage rates are mostly influenced by US Treasury note yields and inflation, although mortgages with variable interest rates do see increases in their interest rates in tandem with Fed rate hikes.
Auto and private student loans may see some increases, as well, as will credit cards. However, most variable-rate credit card debt can be refinanced to a fixed rate.
Interest rates on savings accounts go up with increases in the Fed rate, giving consumers some relief and incentive to save more. However, those with higher interest debt may feel compelled to pay down those balances first.