Credit cards, adjustable-rate mortgages and home equity loans tie their interest rates to a rate set by the Federal Reserve. This rate establishes the cost of short-term loans between banks, and increases ripple out to Florida borrowers and affect their payments. The Federal Reserve has already raised this critical rate twice in 2017 by one-quarter percent each time. Financial experts expect a third increase by a similar amount later in the year.
A chief economist at Bankrate.com said that 15.07 percent represents the average credit card rate. An increase of a one-quarter point in the rate adds approximately $175 in total annual interest to a credit card balance of $5,000. Financial professionals, however, anticipate that the Federal Reserve will continue to raise rates three times a year through 2019, which could raise the annual interest burden on $5,000 to $525.
Home equity loans would experience a less significant cost increase because they start at lower interest rates than credit cards. A $30,000 line of credit incurs an additional cost of about $6 per month with each increase of one-quarter percent. Banks only adjust rates on mortgages annually, which means consumers would not be hit with higher home payments right away. When the adjustments go through, however, a payment on a $200,000 mortgage could go up by about $84.
A future filled with interest rate hikes could prompt a person heavily in debt to investigate ways to avoid foreclosure, repossession, or wage garnishment. Someone concerned about mounting bills could discuss bankruptcy with an attorney while exploring other methods of debt relief that might be available.