A half-point Fed hike adds US$500 a year to a US$100,000 HELOC. A US$10,000 card balance costs that in under 12 weeks
The Federal Reserve is all but certain to raise rates on 9 December, and a voting governor has put a half-point rise on the table. VNN has worked out what a quarter or half point does to home equity lines and credit cards at three balance sizes, when the higher rate actually lands, whether a HELOC fixed-rate lock is worth paying for, and where a spare US$1,000 does the most work this month.
The Federal Reserve’s rate-setting committee meets on 8 and 9 December with markets treating a rate rise as settled. Fed Governor Christopher Waller said on 10 November he was “leaning toward supporting an increase” of a quarter point, and that a half point should be considered if core inflation for October came in around 0.3% or higher. The Bureau of Labor Statistics reported core prices up exactly 0.3% for the month, the third month in a row at that pace. If the Fed moves, the prime rate that sets most American credit cards and home equity lines moves with it, from 7.00% today to 7.25% or 7.50%.
This report puts dollar figures on that for the debts most households actually carry: what a quarter and a half point cost on a home equity line and a credit card at three balance sizes, the federal rules that decide how fast your rate changes and where your extra payments go, a break-even table for locking a HELOC at a fixed rate, and a one-page ranking of where a spare US$1,000 earns or saves the most before the decision. It ends with the questions to put to your lender this month.
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