The Federal Reserve hiked interest rates by 0.75% this week as policymakers act more aggressively to battle inflation, which sits at a 40-year high and is battering American consumers.
But experts say the rate boost, which is the largest increase since 1994, could impact personal finances in a variety of ways, too.
Here are some smart money moves to make now that could place you in a better position as rates rise:
Lock in your mortgage interest rate
Whether you are preparing to buy a home or already have a mortgage, be sure your interest rate is fixed and not adjustable.
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“It really makes sense to be aware because it seems like interest rates are going to be higher than what we’ve been used to over the last decade or so, or longer,” says Robert Gilliland, managing director and senior wealth advisor at Concenture Wealth Management.
“Interest rates are going to be higher, so [people] are going to need to be aware that it might make sense to review refinancing a mortgage,” Gilliland told FOX Business, noting that ARMs could go up “a lot” and that in some instances it might be prudent to refinance out of an ARM even if fixed rates are higher than what an individual is paying now.
“Manage your payments, it may make sense to lock in rates,” he says. “Same would be true with your home equity lines of credit.”
Pay down credit card debt and make moves to reduce interest paid on balances
If you carry credit card debt, which is currently on the rise amid sky-high inflation, be sure to put a plan in place to pay it off because interest rates will continue to rise.
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“With a credit card that’s got a balance, you want to get really, really serious about getting those paid down because those interest rates are going to continue to go up,” Gilliland says.
In the meantime, try to either renegotiate the annual percentage rate by being charged on your balances, or move that debt to a card with lower or zero interest. He suggests checking a site like NerdWallet to find the best deals being offered for transferred balances.
Shop for higher-yield savings accounts
Gilliland says that one positive thing about interest rates rising is that “Americans now have a lot of money sitting in cash,” and “their idle cash is going to start to earn a little bit more than what it has been.”
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Bankrate chief financial analyst Greg McBride agrees, telling FOX Business’ “Cavuto: Coast to Coast” that the upside of higher interest rates is that savers will benefit, and recommends that people shop around to find the best rates.
“Returns have been so low for so long,” McBride told host Neil Cavuto. “Things have turned a corner in the sense that, for much of the last three years, it was a situation where the returns on savings fell and then inflation took off. Now we’re in a where, over the course of the next situation year or two, we’re expecting interest rates to go up and hopefully, eventually, inflation to come down.”
Reassess investment allocations
Gilliland recommends that people meet with their financial advisors to evaluate investment allocations, and be sure they have accounted for stress tests that plan for a higher inflationary environment – particularly folks who are planning to retire soon or have retired in the last ten years.
As for the stock market, Gilliland predicts that “we are in for a roller coaster ride” until there is more clarity on inflation, interest rates, and geopolitical events.
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His advice, given the volatility in the market right now, is to stay diversified, and “don’t try to catch a falling knife.”
FOX Business’ Talia Kaplan contributed to this report.