Five ways the Fed’s interest rate hikes will impact Americans

Mortgage, car and credit card payments are going to increase

The Federal Funds rate sets the rate at which banks and credit unions can lend money to each other as they determine their need for capital to make investments across the economy.

Banks that borrow money at the Federal Funds rate then need to charge a comparable rate to the people and institutions that borrow money from them. So an increase in the Funds rate translates down to higher rates in credit markets, mortgage markets and any industry that relies on financing plans to make payments.

This means higher monthly house and car payments and a bigger price tag on outstanding credit card debt.

Mortgage rates are already seeing sharp increases. Interest payments for the U.S. benchmark 30-year-fixed rate mortgage made the largest one-week jump in 35 years, hitting 5.78 percent as of Thursday, up more than half a percentage point since only the week before.

That means a mortgage payment on a median-valued $400,000 home, after a 20-percent down payment, would now be about $1,875 dollars. Last year, the monthly payment on the same home would have been $1,335. That’s more than a $500 dollar-a-month difference.