What to Expect With Interest Rates?
With the inflation numbers release last month hitting a high last seen 40 years ago, the Federal Reserve moved to increase interest rates to try to reverse the trend.
Here is what you can expect:
Short-term interest rates will rise along with the federal funds rate. Home equity line of credit rates are typically connected to the federal funds rate. They will move together up or down, in this case up. Credit card and short-term consumer borrowing rates will also be affected. Auto loan rates may rise, but to a lesser degree.
Long-term rates, such as for mortgages, are not directly affected when the Fed raises short term rates but may follow short term rates higher because of the current inflationary environment. Expect the Treasury 10- year yield to rise to 2.3% by the end of 2022. The rise in the 10-year rate will also push up mortgage rates, from
the current average of 3.5% for 30-year fixed-rate loans, to 4.0% by the end of 2022. 15-year fixed-rate mortgages will rise from 2.8% to 3.4%.
How many rate hikes are to be determined, but one is for certain and more to come if inflation does not start trending downward. The Federal Reserves goal is to get the inflation number below 3% by years end.
We are getting a lot of calls regarding income planning how these changes will affect plans we put have put together, we assure them that the guaranteed income we build into their plans will not be affected.