Americans Finally Start to Feel the Sting From the Fed’s Rate Hikes

livemint.com:

Rising interest rates are hitting Americans’ finances. Consumers in the market for loans to buy homes and cars are discovering that, because of the Federal Reserve’s rate increases, their money gets them a lot less than it would have a few years ago. Meanwhile, those with credit cards and other loans that carry rates pegged to broader benchmarks are finding they have gotten much more expensive.

Fed officials signaled last week that they plan to keep interest rates high for quite a while. For families who don’t need to borrow, higher rates might not affect daily life too much. But for those who do, the Fed’s aggressive rate increases are really beginning to sting.

“The bite is starting now," said Liz Ann Sonders, chief investment strategist at Charles Schwab. Borrowers shopping for mortgages or auto loans are experiencing sticker shock. New 30-year fixed-rate mortgages today carry rates around 7%, up from 3% two years ago.

That increase can mean a home buyer has to pay hundreds of dollars more a month compared with two years ago. Rates on car loans have also shot higher. Buying a home or car right now is “completely unaffordable for the typical American household because you’re mixing the higher borrowing costs with the high prices," said Mark Zandi, chief economist at Moody’s Analytics.

He estimates that the typical American household would need to use 42 weeks of income to buy a new car, as of August, up from 33 weeks three years ago. The National Association of Realtors calculates that the typical American family can’t afford to buy a median-priced home. Daniel Waddell started looking for a home in St.

Paul, Minn., in January. Mortgage rates kept ticking up during his search. He eventually bought a three-bedroom,