5 Moves to Make Before the Fed Raises Interest Rates Again

Act soon, before rates rise again.

In mid-June, the Federal Reserve raised interest rates by 0.75%. That represented its largest single rate hike in 28 years. 

The reason the Fed moved forward with such a large rate hike is that it's trying to slow the pace of inflation. For months, consumers have been struggling with sky-high living costs, and the thought is that raising rates will make borrowing more expensive, leading to less spending. Once spending declines, demand won't exceed supply quite as much, so the cost of goods should start to come down.

But this recent interest rate hike isn't the last one consumers should expect. Rather, we could see borrowing get even more expensive during the latter part of 2022. And so you may want to make these moves in the near term, before that happens.

1. Lock in a mortgage

If you've been thinking about buying a home, you may want to secure a mortgage before it gets even more expensive to take one out. As it is, mortgage rates are much higher today than they were at the start of the year. And given that home prices are up as well, you don't want to put yourself in a position where you're forced to pay even more to finance a home.

2. Pay down some credit card debt

Owe money on your credit cards? Here's some bad news. Credit card interest rates are variable, which means they can rise over time, making your debt cost even more. In light of additional interest rate hikes, you may want to try chipping away at some of your existing debt, or seeing if you can move it over to a new card with a 0% introductory APR to get a bit of a reprieve.

3. Pay off your HELOC

Borrowed money via a home equity line of credit? If you're carrying a HELOC balance, now's a good time to pay it off. Like credit cards, HELOCs commonly come with variable interest rates, and those rates can reset frequently. So the sooner you're able to knock out that debt, the less money you might spend. 

4. Secure a personal loan

If you have a need to borrow money, a personal loan could be an affordable way to go about it. But act quickly, because the sooner you lock in a loan, the less interest you might pay. Thankfully, personal loans come with fixed interest rates, so you'll have predictable payments for the sum you borrow.

5. Open a short-term CD

Banks are starting to pay more interest in light of rising rates. If you have money you don't expect to use for a while, it could pay to compare six-month and one-year CD rates and see if you'll earn a lot more on your cash than what a regular savings account will pay you. But don't sign up for too lengthy a CD. Since rates are likely to keep going up, locking yourself into a longer-term CD could stunt your savings' growth.

Rising interest rates can be a mixed bag for consumers. It pays to make these moves to position yourself well financially in light of them.