Interest rate increase will impact how much you pay for your next house, vehicle

Just how much more it will cost is a question KSLA News 12 explored
Just how much more it will cost is a question KSLA News 12 explored.
Published: Nov. 2, 2022 at 3:47 PM CDT
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SHREVEPORT, La. (KSLA/AP) — The Federal Reserve’s decision Wednesday to raise its benchmark interest rate by three-quarters of a point for a fourth straight time means it soon will cost even more to buy a house or a vehicle.

Just how much more it will cost is a question KSLA News 12 explored.

KSLA News 12′s Michael Barnes spoke with a real estate agent about the impact on the housing market and how both buyers and sellers are affected.

He also met with a car dealer who broke down the cost of a vehicle at the start of the year as compared to now and after the rate increase goes into effect.

The example below shows what the monthly note would be on the sample vehicle:

The Federal Reserve’s move raised its key short-term rate to a range of 3.75% to 4%, its highest level in 15 years. It is the central bank’s sixth rate hike this year — a streak that has made mortgages and other consumer and business loans increasingly expensive and heightened the risk of a recession. Those increases make it more expensive to borrow money for things like cars and homes.

The average rate on a 30-year, fixed-rate mortgage, just 3.14% a year ago, surpassed 7% last week, mortgage buyer Freddie Mac reported. And sales of existing homes have dropped for eight straight months.

The actual interest rate hike will take place in December, but the Fed’s decisions impact markets more immediately.

Stock and bond prices, which had risen immediately after the Fed issued its policy statement, fell into negative territory after Federal Reserve Chairman Jerome Powell made clear at his news conference that the central bank remained committed to steadily tightening credit to a level that will weaken the economy.

Typically, the Fed raises rates in quarter-point increments. But after having miscalculated in downplaying inflation last year as likely transitory, Powell has led the Fed to raise rates aggressively to try to slow borrowing and spending and ease price pressures.