The Federal ReserveB次元官网网址檚 expected move Wednesday to raise interest rates for the 11th time could once again send ripple effects across the economy.

Mortgage rates, which have surged since the Fed began lifting rates in March 2022, could rise further. So could rates on credit cards and some business loans.

Perhaps no one has felt the pain more than car buyers. ItB次元官网网址檚 not just that sticker prices are way up. Or that lenders have tightened credit standards. On top of all that, steadily higher auto loan rates have elbowed many would-be buyers out of the market.

Consider: has found that 14% of applicants for auto loans were rejected over the past year B次元官网网址� the highest such proportion since the New York Fed began tracking the figure in 2013 B次元官网网址� up from 9% in February.

Auto-loan applicants, of course, arenB次元官网网址檛 the only borrowers being turned down in larger numbers these days. In that same June 2022-June 2023 period, applicant rejections for credit cards, mortgages, mortgage refinancings and higher credit card limits all rose, too, according to the New York Fed. Overall, the rejection rate for credit applicants reached 21.8 percent, the highest level since June 2018.

Some of those rejections reflect the subpar credit of loan applicants. But some are a direct consequence of the FedB次元官网网址檚 rate increases B次元官网网址� the most aggressive in four decades. Those hikes, in turn, have made high-cost purchases out of reach for some.

HOW WILL BORROWERS BE AFFECTED BY THE FEDB次元官网网址橲 LATEST MOVE?

Credit card rates are at or near all-time peaks, and mortgage rates have more than doubled in two years.

B次元官网网址淣o one should expect them to stop rising anytime soon,B次元官网网址� said Matt Schulz, chief credit analyst of LendingTree. B次元官网网址淧erhaps the scariest thing of all for folks with credit card debt is that interest rates are actually rising more quickly than the Fed is forcing them to.B次元官网网址�

The average Annual Percentage Rate (APR) on a currently held credit card that charges interest is 22.16%, according to . ThatB次元官网网址檚 up about 6 percentage points from the average rate in the first quarter of 2022. The , the highest rate since LendingTree began tracking it in 2019.

Whenever possible, Schulz recommends that card users consider asking their issuers to lower their APR. LendingTree recently concluded that a majority of cardholders who had asked their card issuers for a lower rate received one. The average reduction was significant B次元官网网址� 6 percentage points.

B次元官网网址淚t is well worth your time to make that call,B次元官网网址� Schulz said.

I NEED TO BUY A CAR. WHATB次元官网网址橲 THE OUTLOOK FOR AUTO LOANS?

Many people were already having trouble affording new vehicles before WednesdayB次元官网网址檚 expected quarter-point hike. The average price paid for a new vehicle last month was nearly $48,000 B次元官网网址� about 25% above the pre-pandemic average. Used vehicle prices have jumped by even more: The average one now costs nearly $30,000, a stinging 45% above what it was before the pandemic.

In some cases, even people with good credit are being rejected for auto loans. The problem for them is that with vehicle prices up sharply, the additional burden of higher loan rates B次元官网网址� from 4.5% on average in March 2022 to 7.2% in June B次元官网网址� has made monthly payments unaffordable.

B次元官网网址淚 think people are just not able to qualify for the payments,B次元官网网址� says Jessica Caldwell, executive director of insights for Edmunds.com.

The average monthly auto payment last month, she said, was $736. Over the life of an an average loan B次元官网网址� just under six years B次元官网网址� a typical borrower is paying nearly $9,000 in interest.

David Kelleher, who owns David Dodge-Chrysler-Jeep-Ram in Glen Mills, Pennsylvania, said he has seen loan rejections rise even in his affluent Philadelphia suburb, though not as much as they have nationally. The larger loan sums that borrowers are now financing, along with a small uptick in delinquencies, have made lenders more cautious.

B次元官网网址淚 think thatB次元官网网址檚 probably making them tighten the reins a little bit,B次元官网网址� he said.

Kelleher said he hopes the Fed stops raising rates after this week, given that vehicle prices, a key component of inflation, have begun to ease. Prices had skyrocketed in 2021, a result of high demand as the economy roared out of the pandemic recession and clogged supply chains caused a severe shortage of vehicles for sale.

B次元官网网址淭hese interest rates,B次元官网网址� Kelleher said, B次元官网网址渁re really starting to hurt us.B次元官网网址�

Still, Caldwell said she doesnB次元官网网址檛 expect the FedB次元官网网址檚 latest quarter-point hike in its benchmark rate to significantly affect auto loan rates. With factories cranking out more autos and vehicle availability improving, she expects automakers to spend more to subsidize loan rates to help fuel sales.

Despite the rising cost burden, auto sales have remained relatively solid as prices have eased slightly and the supply of vehicles has grown: For the past two months, sales have hit an annual rate of 15 million.

WHATB次元官网网址橲 IN STORE FOR SAVERS?

ThatB次元官网网址檚 where the good news lies: Yields on savings accounts and certificates of deposit (CDs) have reached their highest levels in a decade, said Ken Tumin, a banking expert and founder of DepositAccounts.com. The average online savings account yield is 4.08%, up from 3.31% at the start of this year, according to DepositAccounts.com.

Even juicier yields are available from CDs. The average online one-year CD yield is now 4.89%, up from 4.37% on Jan. 1 and from a puny 1.90% one year ago. The average online five-year CD yield is 3.93%, down from 4.04% on Jan. 1, but up from 2.89% a year ago.

All that said, those richer yields might not last if price pressures across the economy ease further.

B次元官网网址淚f we continue to get good news on inflation in the coming months,B次元官网网址� Tumin said, B次元官网网址渆xpect long-term CD rates to drift downward.B次元官网网址�

WHAT ABOUT MORTGAGES?

If the economy does cool, Jacob Channel, senior economist for LendingTree, predicts that mortgage rates will end the year closer to 6% than to 7%. The current national average for a 30-year fixed-rate mortgage, according to Freddie Mac, is 6.78%.

Rates have fluctuated sharply this year. The average 30-year fixed rate, which had pierced 7% back in October, fell to just above 6% in early February before surging back to 6.96% in mid-July. On the heels of better-than-expected inflation data for June, the average mortgage rate has eased a bit again.

B次元官网网址淭his goes to show just how much mortgage rates can vary from week to week and how hard it can be to truly determine what trend theyB次元官网网址檙e going to follow in the long term,B次元官网网址� Channel said. B次元官网网址淚tB次元官网网址檚 likely that mortgage rates will continue to fluctuate in the face of the uncertainty that permeates todayB次元官网网址檚 economy.B次元官网网址�

IS THE FED MANAGING TO DEFEAT INFLATION?

The Fed has clearly achieved progress. Inflation, which peaked above 9% last year, was just . ThatB次元官网网址檚 thanks, in part, to easing prices for gasoline, airline fares, and groceries.

Even so, current measures of inflation remain above the FedB次元官网网址檚 2% target. The result is that many households are still being squeezed by higher prices and struggling to afford basic necessities. Reducing inflation back to the FedB次元官网网址檚 target level will require more time.

And that means high rates on consumer and business loans are likely to remain in place well into 2024.

___

Like us on and follow us on .