Fed Hikes Interest Rates, Making Borrowing Costs Rise for Some

The Federal Reserve has raised its benchmark federal funds rate for the first time in over three years. The increase is 25 basis points, lifting the target range from 3.5%-3.75% to 3.75%-4%. This move will likely affect consumers with variable-rate debt, such as credit cards and home equity lines of credit.

George Kamel, co-host of 'The Ramsey Show', notes that borrowing costs have increased. For example, a credit card balance may now be at 28.25% instead of 28%. Similarly, a mortgage rate on a fixed-rate loan could rise from 6% to 6.25%.

Kamel emphasizes that the Fed's decision primarily affects variable-rate debt, including credit cards, home equity lines of credit (HELOCs), and adjustable-rate mortgages once they reset. Consumers with existing fixed-rate mortgages, auto loans, or other fixed-rate debt will not see their monthly payments change.

Mortgage rates are influenced more by Treasury yields and the bond market than by the federal funds rate, according to Kamel. He suggests that prospective homebuyers may see borrowing costs edge higher, but it's not a significant increase.