The Federal Reserve raised interest rates again. NewsdayTV’s Cecilia Dowd reports on what it means and why it happened. Credit: Newsday/James Carbone

Long Islanders will soon face higher borrowing costs for credit cards and auto loans — and slightly better savings rates — as a result of the Federal Reserve raising its benchmark rate by three-quarters of a percentage point on Wednesday.

It was the third straight increase of that size as policymakers seek to quell stubbornly high inflation. The increases make it more expensive for consumers and businesses to borrow money.

The Fed rate has a more direct influence on short-term borrowing such as auto loans and credit card interest rates than on longer loans, such as mortgages. But factors including inflation and the Fed increases have helped push up mortgage rates, making homebuying much more expensive.

The average 30-year mortgage rate for the week ending Sept. 15 was 6.02%, which was more than double the average at this time last year, 2.86%. That spike means a buyer purchasing a home this year with the same size mortgage, will pay hundreds more each month toward their mortgage to cover added interest costs.

The 30-year mortgage rate more closely tracks the 10-year U.S. treasury yield, which hit its highest level since April 2011 earlier this week, as investors demand higher returns for holding government debt.

And even though the Fed’s move doesn’t directly affect mortgage rates, changing rates for credit cards and auto loans can still influence what a homebuyer can afford, said Andrew Russell, founder and owner of RCG Mortgage, a mortgage broker in Hauppauge.

“It trickles down into a buyer’s qualification,” Russell said.

Mortgage professionals can help clients weigh whether they should pay down debt to receive a better interest rate or use a larger down payment for their purchase, he said.   Also, higher mortgage rates that knock some buyers out of the market can reduce competition for homes, helping buyers who can still qualify for loans, he said.

“Even though the rates are a little bit higher, earlier in the year, you would have had to pay more for that house,” Russell said.

But even as higher rates have slowed home sales on Long Island, prices have remained high, with the median sale price in August at  $700,000 in Nassau and $565,000 in Suffolk.

Zahra Jafri, founder and president of Lynx Mortgage Bank in Westbury, said she expects mortgage rates will continue to tick up as the Fed works to get inflation under control. Still, Long Island might not see falling demand for homes in the same way as other regions.

“The thing that separates us from different parts of the country is we still have a supply problem,” Jafri said. “There are still ratio-wise more buyers than there are sellers.”

For mortgage rates to return to lower levels, investors will need to see some signs of economic weakness, such as higher unemployment and lower GDP, which would lead to more purchases of government bonds, said Taylor Marr, deputy chief economist at Redfin. Consumers’ uncertainty around where the economy is headed bodes poorly for home sales.

“You don’t want to be making very big financial decisions right now, such as buying and selling real estate for the most part, if you feel like your job is uncertain,” Marr said.

Here are other ways the Fed rate hikes will affect Long Islanders:

Credit cards 

Even before the Fed's decision Wednesday, credit card borrowing rates have reached their highest level since 1996, according to, and these will likely continue to rise.

Those who don’t qualify for low-rate credit cards because of weak credit scores are already paying significantly higher interest on their balances, and they'll continue to.

As rates have risen, zero percent loans marketed as “Buy Now, Pay Later” have also become popular with consumers. Yet longer-term loans of more than four payments that these companies offer are subject to the same increased borrowing rates as credit cards.

Home equity loans

For people who have home equity lines of credit or other variable-interest debt, rates will increase by roughly the same amount as the Fed hike, usually within one or two billing cycles. That’s because those rates are based in part on banks’ prime rate, which follows the Fed’s.

Auto loans

Auto loans are at their highest levels since 2012, according to’s Greg McBride. Rates on new auto loans are likely to go up by nearly as much as the Fed's rate increase.

The entire increase isn’t always passed on to consumers; some automakers are subsidizing rates to attract buyers, said Jessica Caldwell, executive director at says a 60-month new vehicle loan averaged just over 5% last week, up from 3.86% in January. A 48-month used vehicle loan was 5.6%, up from 4.4% in January.

CDs, money market accounts

Savers will start to see a small upside. 

Lawrence Sprung, founder of Hauppauge investment firm Mitlin Financial Inc., said yields on some money market accounts have risen from zero to 1-2% in recent months.

“They’ve had a huge run-up,” he said.

That increase, however, still puts those short-term investments well below the roughly 8% inflation rate, he said.

On Wednesday, the web site of Mineola-based Hanover Community Bank was advertising a six-month certificate of deposit with a $500 minimum and an annual percentage yield of 1.5%.

“Investors have to be cautious and mindful,” Sprung said. “If inflation remains at these levels, you’re still not getting a real return.”

— with Ken Schachter and AP



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