January 7, 2019
We’re into our first full week of 2019 but the Federal Reserve wrapped up 2018 with a key interest rate hike. Rates on credit cards, adjustable-rate mortgages, home equity lines of credit and some student loans will rise, increasing borrowers’ monthly payments. All have variable rates that directly respond to the Fed’s move.
Orion’s experienced brokers constantly remind clients that credit card rates are generally tied to the prime rate and will see a higher credit card rate within one to two billing cycles. Average credit-card rates are 17.6 percent, but if a person pays their balance off every month, brokers will often tell clients they avoid interest charges altogether. If a client is staring at hefty outstanding balances, consider consolidating those into a lower, fixed-rate personal loan or transfer to another credit card offering a 0-percent rate for an introductory period.
If a client has tapped their home equity, it'll be more expensive to pay back. Ask your Orion AE about some of our great fixed-rate mortgage options. The average 30-year fixed mortgage rate has already climbed from about 4 percent in early January to 4.63 percent, largely because investors expect federal tax cuts and spending increases – along with a healthy economy – to push inflation higher. For homebuyers, any impact on the monthly bill would probably be relatively small. A quarter-point rate increase on a $200,000 mortgage would boost the monthly payment by about $30.
Although Orion doesn’t do auto lending, monthly payments on a new auto loan also could edge higher, though many buyers might not feel it because of auto dealer incentives. Clients sometimes ask mortgage brokers about deals. Auto manufacturers frequently offer discounted financing to encourage car sales, and banks and other lenders compete with those rates.
Many private student loans come with variable interest rates that follow the prime rate. When the loan rate adjusts depends on what's written in your client’s loan terms. For instance, a monthly payment will increase for those on a regular payback schedule. But if a client is on an income-repayment plan, their monthly payment won't change but a bigger portion will go toward interest rather than principal. Federal student loans have a fixed interest rate set by Congress and are not affected by the Fed's move.
Regardless of whether or not the U.S. Government is open, Orion is continuing to offer all programs to our valued broker clients. Just ask!