Fed Rate Hike Sends Mortgage Rates Soaring Above 7%

The Federal Reserve has raised its benchmark interest rate to 3.75% to 4%, causing mortgage rates to surge above 7%. The average 30-year fixed mortgage rate is now around 7.11%, according to Mortgage Research Center data. This increase in mortgage rates will put more pressure on prospective homebuyers, making it even harder for them to afford a home.

Higher mortgage rates can significantly increase the monthly cost of buying a home, even if the home's price stays the same. For example, a $300,000 30-year mortgage at 7% has a principal-and-interest payment of roughly $1,996 a month. At 6.5%, the payment would be about $1,896 a month - a difference of roughly $100 each month.

Meanwhile, credit card borrowers can expect higher interest charges as banks adjust their prime rates in response to changes in the federal funds rate. However, savers with interest-bearing accounts may have an opportunity to earn more when rates are higher.