6 things to know about higher rates ahead

As the homebuying season winds down, home loan rates may be on the rise. At the end of August, the benchmark 30-year fixed-mortgage rate was 4.69%, up from 3.97% from a year ago.

In July and for the second month in a row, people had mixed opinions about home buying and selling, according to the Fannie Mae National Housing Survey. Respondents cited “high home prices” as the top reason why it is “both a good time to sell a home and bad time to buy a home.” High home prices, coupled with higher rates, may make for a tough homebuying season for the quarter ahead.

3 ways interest rates affect loans and credit card debt

Here are ways interest rates affect mortgage rates, as well as credit cards, student loans, and car loans.

  • Interest rates typically head up as the country’s economic health improves. This can happen as a result of decisions made by the Federal Reserve board (the people at the Treasury who control the flow of money in the U.S.). They convene eight times per year to assess the state of the economy and then decide what to do with the prime rate.

  • The U.S. prime rate is an index or “foundation rate” to price short- and medium-term loan products. But here’s the thing: It doesn’t directly foretell fixed mortgage rates. That said, there is an indirect impact. When the prime rate rises, it typically means the economy is doing well, which results in home loan rates gradually rising.

  • Mortgage rates aren’t the only things that go up when the Fed raises rates. The cost to carry credit card debt and to borrow money for student loans and car loans goes up, too.

3 ways you can get ahead of rising interest rates

  • Car loans: Before shopping around for a car loan, make sure your credit is in good shape and get pre-approved for a loan before stepping foot in a dealership.

  • Credit cards: At the very least, make on-time payments on your credit cards. Pay the full balance owed per statement if you can, otherwise pay as much as you can swing beyond the minimum payment.

  • Shopping for a new credit card? Read reviews from trusted, reputable sites (e.g., The Wirecutter, Consumer Reports, NerdWallet) and get your head around the rates, terms, fees, and perks of attractive cards.

    Meanwhile, if you have savings in interest-bearing savings accounts, you can expect to enjoy slightly higher interest paid on your savings with online accounts. However, the interest rates on savings accounts with brick-and-mortar banks tend to stay lower than digital or virtual banks.