How the Federal Reserve's interest rate hike impacts consumers

Posted at 10:22 PM, May 04, 2022
and last updated 2022-05-04 23:33:52-04

DETROIT (WXYZ) — After months of rising inflation, the Federal Reserve System raised interest rates by half a percentage point, the largest increase in more than 20 years.

The move was expected, along with more rate hikes that are likely to follow.

7 Action News spoke with local financial experts to learn how this rate hike impacts consumers in metro Detroit.

“Anything that is adjustable is going to start creeping up," said Dan Casey, the owner of Bridgeriver Advisors in Bloomfield Hills.

WalletHub predicts this rise will lead to $3.3 billion in additional interest payments on credit cards in 2022. According to LendingTree, more than half of Americans carry a credit card balance, with the average amount in Michigan over $5,700.

As for mortgage rates, Clarkston-based real estate agent Mark McCaslin with The Brokerage Real Estate Enthusiasts says they’ve already started to climb in expectation of the rate hike.

“Home buyers are already starting to feel that pinch,” McCaslin said. "What's happened over the last six weeks is the mortgage rates have already gone up a lot. We’ve gone from the 3.5% rate that most customers were getting a couple months ago to they're already hitting 5% and in some cases 5.5%.”

According to Freddie Mac, the average 30-year rate is now 5.1%, up two full percentage points since the start of the year.

“We're mid-5's right now, so as the fed continues to rise, we’d see some modest increases,” said Brian McCown, the assistant vice president of Michigan First Mortgage. "The days of 2020/2021, very low interest rates below 3% — we don’t expect to get back there anytime soon.”

The Federal Reserve is expected to add more rate hikes throughout the year. They meet again in June and July.