Will mortgage rates rise? What to know

WASHINGTON — Are mortgage rates headed up? How about car loans? Credit cards?

How about those nearly invisible rates on bank CDs — any chance of getting a few dollars more?

With the Federal Reserve having raised its benchmark interest rate Wednesday and signaled the likelihood of additional rate hikes later this year, consumers and businesses will feel it — if not immediately, then over time.

Here are some question and answers on what this could mean for consumers, businesses, investors and the economy:

I’m thinking about buying a house. Are mortgage rates going to march steadily higher?

Hard to say. Mortgage rates don’t usually rise in tandem with the Fed’s increases. Sometimes they even move in the opposite direction. Long-term mortgages tend to track the rate on the 10- year Treasury, which, in turn, is influenced by a variety of factors. These include investors’ expectations for future inflation and global demand for U. S. Treasurys.

When inflation is expected to stay low, investors are drawn to Treasurys even if the interest they pay is low, because high returns aren’t needed to offset high inflation. When global markets are in turmoil, nervous investors from around the world often pour money into Treasurys because they’re regarded as ultra- safe. All that buying pressure keeps a lid on Treasury rates.

So does that mean home- loan rates won’t rise much anytime soon?

Not necessarily. Inflation is nearing the Fed’s 2 percent target. The global economy is improving, which means that fewer international investors are buying Treasurys as a safe haven. And with two more Fed rate hikes expected later this year, the rate on the 10-year note could rise over time — and so, by extension, would mortgage rates. It’s just hard to say when. Behravesh forecasts that the average 30-year mortgage rate will reach 4.5 percent to 4.75 percent by year’s end, up sharply from last year. But for perspective, keep in mind: Before the 2008 financial crisis, mortgage rates never fell below 5 percent.

[SUSAN WALSH/THE ASSOCIATED PRESS] Federal Reserve Chair Janet Yellen speaks during a news conference in Washington on Wednesday. The Federal Reserve is raising its benchmark interest rate for the second time in three months and signaling that any further hikes this year will be...