The Federal Reserve is signaling that it will raise interest rates above 3% by the end of the year as it struggles to control inflation without plunging the economy into a recession.
The Fed's decision this week to raise the benchmark interest rate by three-quarters of a percentage point, the biggest rate hike since 1994, will cause a ripple effect for borrowers and savers. Higher interest rates make it more expensive to borrow money, while savers stand to benefit -- albeit to a lesser degree.
If the average rate increases to 9%, the same monthly payment would grow by hundreds more dollars, to $2,250. "Bad as it may be, the Fed is telegraphing those interest rates are going up, not down," he said. "So if you delay a few months, the likelihood is the mortgage interest rates will be higher still."People carrying floating-rate debt, including credit card debt and some student loans, should prioritize paying that down immediately in an environment with rising interest rates, Frank said.
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