The effect the latest Fed rate hikes could have on your finances


The Federal Reserve raised its key interest rate on Wednesday by 50 basis points or a half-point, bringing it to a range of 4.25% to 4.5%, the highest level in 14 years, which will make borrowing much more costly.

Federal Reserve raises interest rates again: How it could affect your finances

The Federal Reserve – for the seventh time this year – raised interest rates. The Fed did so by a smaller margin this time, 50 basis points or a half-point, instead of 75 basis points or three-quarters of a point, as it had the last four consecutive times, the Associated Press reported.

Nonetheless, these moves by the Federal Reserve to tackle inflation mean that both consumers and businesses will have to spend roughly double what it cost a year ago to borrow money. Plus, the interest borrowers pay is significantly more than the Federal Reserve’s benchmark rate.

Anyone needing to borrow money to cover a large purchase, such as a home, car, a large appliance, etc., or those who have a lot of credit card debt will experience some immediate financial pain.

The only bright spot is that those who have money to save will earn a bit more in interest.

Here is a brief overview of what the latest Federal Reserve interest rate hike could mean for the finances of borrowers.

Vehicle loans

Since March, when the Fed began increasing rates, the average new vehicle loan increased more than 2 percentage points, climbing from 4.5% to 6.6% in November, increasing payments to an average of $61 to $718. Used vehicle loans are up 2.1 percentage points to a massive rate of 10.2%, which has increased the average payment up $22 per month to $565, according to auto site.

With the interest rate increases, the average new vehicle with a price of $47,000 now costs $8,436 in interest, according to Edmunds.

Home loans

It’s important to note that home mortgage rates do not always track in synchronization with the Federal Reserve’s benchmark rate, instead tracking the yield on the 10-year US Treasury note.

Last week, Freddie Mac reported that the average rate on the benchmark 30-year mortgage has dropped to 6.33%, the AP reported.

However, as of Friday, following Wednesday’s Fed rate hike, according to Google, the average mortgage rate on a 30-year fixed loan in California was 7.023%.
Credit card rates

Even before the Fed’s latest increase, credit card borrowing rates had reached their highest level since 1996, according to Wednesday’s rate hike by the Fed will surely send credit card rates upward.

Trying to figure out the true average for Credit card rates varies by source.

For example, Lending Tree declares the average rate is 22.91% and says it is the highest since it began tracking in 2019.

Wallet Hub declares the average rate at 21.21% for new offers.

According to, the national average APR was 19.59% on Wednesday, December 14, 2022, before the federal rate hike, and expects it to climb above 20%.

All in all, the rates are astronomical and moving toward borrowers paying 1/4th of an item’s cost in interest charges.
Student loans

The current range for federal student loans ranges between 5% and 7.5%. However, borrowers who take out new private student loans should expect to see higher rates.