Consumers should refinance their current loans soon before the anticipated Federal Reserve rate hikes occur later this year, saving thousands of dollars by paying less interest.
The Federal Reserve will not raise interest rates when they meet this week, but rates could increase by this summer, said Greg McBride, chief financial analyst for Bankrate, the NewYork-based financial content company.
"Consumers should pay down their current variable rate debts whether the Federal Reserve raise rates, because they are inclined to do so in future meetings," he said.
The Fed is not likely to make any moves this week, but an increase could take place at the June or July meeting, said Bluford Putnam, chief economist for the CME Group, a Chicago-based derivatives marketplace.
The reprieve consumers have enjoyed during the past decade when the central bankers held rates steady is likely to end this year as more than one increase is possible, said McBride. The Fed could raise interest rates as soon as the June meeting.
Homeowners with adjustable rate mortgages should consider refinancing their current loan into a fixed rate. The balance transfer deals offered by credit card issuers will also decrease eventually. Consumers saddled with larger amounts of debt can still lock in offers with a 0% balance transfer for 21 months.
"The interest rates on credit cards will only get more expensive," he said. "If you lock in a good deal right now, you can give yourself a longer window to pay it off for once and for all."
The Fed will evaluate the economic data from the first quarter of 2017. Economic growth was "really weak and disappointing," said McBride. Wages have also remained stagnant while some industries such as the tech sector are facing a shortage of qualified employees.
"The number of job openings is at a record high of 5.7 million unfilled jobs," he said.
Auto loans are likely to move higher in 2017, but they do not have a "measurable impact on monthly payments," said McBride. "It is nothing to lose any sleep over as rates are still competitive."
The majority of credit cards have variable interest rates, leaving consumers susceptible to potential rate increases later this year, said Bruce McClary, spokesman for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization.
"Now is the time for cardholders to put debt repayment in high gear, finding extra room in the budget to pay off balances as quickly as possible," he said. "Transferring balances to cards with interest-free introductory offers or competitive long-term rates can also help accelerate debt repayment while saving money."
While many homeowners did not "feel much pain" after the March increase, the Fed could increase its pace of rate hikes and the combined impact could make them "feel as though they are making an extra mortgage payment each year," McClary said.
A rate increase this summer is still on track although the 0.7% GDP growth in the first quarter was "quite weak, said Putnam.
"The Fed was aware it would be weak when they raised rates this year," he said.The second quarter should generate more GDP growth of 2.5% to 3% have more bounce back, said Putnam.
Corporate profits have yielded good results so far in 2017 and with strong unemployment numbers, the Fed will feel comfortable hiking rates during the second half of the year while they examine the inflation data, he said.