5 Wise Money Moves Before The Fed Starts Raising Interest Rates Again
5 Wise Money Moves Before The Fed Starts Raising Interest Rates Again
Time's almost up on ultralow rates, so don't be caught off guard.
Federal Reserve Chairman Jerome Powell arrives for a Senate Banking Committee meeting in Washington, Sept. 28, 2021.
By Sigrid Forberg Jan. 27, 2022
Word just came down that you’ll soon pay more in interest for many loans. And your credit card balance with a variable interest rate? It’s about to cost you more too.
Federal Reserve Chairman Jerome Powell and the other policymakers at the central bank said this week that they’ll raise rates “soon,” likely at their next meeting in March, to try to slow inflation that’s rising faster than it has in almost 40 years.
But regulators held a key interest rate near zero for now. You’ll need to act quickly to take advantage of today’s lower rates for a large purchase or for a loan for a necessity, like a new car to replace an old pile of junk that needs too many repairs.
Here are five money moves to jump on before rates rise.
1. Refinance Your Home Loan
Mortgage rates are going up from historically low levels in the pandemic, but they’re still a good deal for many people. The Fed’s expected rate increases this year will affect variable-rate loans, and its changing pandemic-related policies could create a climate for higher fixed-rate mortgages as well.
But take a look at your rates anyway because nearly 6 million homeowners could still save $1.6 billion monthly by refinancing now, the mortgage data and technology firm Black Knight tells MoneyWise.
The average interest rate on a 30-year fixed-rate mortgage hit 3.56% last week, up from 3.45%, government-sponsored mortgage buyer Freddie Mac reports. But remember that rates for shorter mortgages, while also trending upward, typically run lower than 30-year rates, so refinancing for a quicker payoff might still save you money in the end.
Plus, 3.56% is an average — lenders will offer you lower and higher rates. That’s one reason you shouldn’t skip the step of comparing rate quotes from multiple companies.
2. Consolidate Your Debt
The pandemic made it difficult for Americans to travel, eat in restaurants and shop at retailers, and many used the money they didn't spend on those activities to increase their savings and pay down debt.
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