The Fed’s benchmark interest rate hike will affect the minority of households that take out adjustable-rate mortgages or home equity lines of credit, probably increasing their cost to borrow. Affected homeowners who have the option of converting to fixed-rate loans may want to consider doing so, Harris of USC said.
It’s possible that the larger-than-expected increase in the federal funds rate could convince investors that inflation will be tamed sooner and thus send fixed-rate mortgages down, said mortgage industry consultant David Stevens, the former head of the Mortgage Bankers Assn.
Consumers are already paying more for gas, groceries and everyday items, but they should expect to fork over more in other parts of their lives after Wednesday’s interest rate increase.
The increase in the Bank of England interest rate from 1% to 1.25% is set to affect homeowners on variable rates, as well as some tenants and households on fixed rates. More than two million households face increased mortgage payments after the latest Bank of England interest rate rise, which experts say could create more "mortgage prisoners".