Many experts expect the U.S. Federal Reserve to raise key interest rates. But, these experts also say that any changes shouldn't have an immediate impact on the typical family.
"Nobody's going to see sticker shock," said Greg McBride, chief financial analyst at consumer finance portal Bankrate.com. "An initial rate move has almost an inconsequential effect on the household budget."
What will matter, however, is the impact of steady interest rate increases over time.
McBride warns that while the Federal Reserve should be slow and methodical in its approach to interest rates, there's a good chance the "cumulative effect of a series of rate moves" over the next few years will collectively add up.
So who would get some help, and who would see increased costs under higher rates? Here are some winners and losers:
Home sellers: Though it's a bit counterintuitive, higher interest rates could actually be good for home sales at the beginning of any period of rate increases. "It may cause a flurry of activity as buyers look to get in a new home before future rate hikes hit," said Whitney Fite, President of Angel Oak Home Loans in Atlanta. In other words, if the cost of borrowing will be higher tomorrow, why not take out that mortgage today and get more bang for your buck?
Home buyers: It's also worth noting that even with a small rate increase, mortgage rates are still near "historically low levels," Fite added — so it's not like buyers will be priced out of homeownership overnight. The rate on 30-year, fixed-rate mortgages topped 6.5% before the financial crisis and never dropped below 5.2% for all of the 2000s, for instance, so prospective home buyers shouldn't fret.
Shoppers with good credit: As long as you have a good credit history, you should still expect to see 0% APR promotional deals at your local car dealership or furniture store, said Greg McBride of Bankrate. The terms may vary slightly over time, for instance moving to 0.5% instead of 0% flat or with financing for 12 months instead of 18 months, he adds. But "those with good credit or who shop around, will always get attractive promotional offers," McBride said.
Savers: In the low interest-rate environment since the Great Recession, banks suffered low margins on loans. To prop up those interest margins, said McBride, banks will likely hike lending rates while leaving rates on CDs and other deposits pretty flat going forward. There may be a few opportunities for consumers willing to shop around, said McBride, but expecting a broad move toward better savings rates simply because of a move by the Fed is "a recipe for disappointment."
Borrowers with variable-rate debt: Naturally, the impact of any move by the Federal Reserve will be most apparent on loans that are pegged to benchmark interest rates. McBride says this is "particularly true for variable-rate debts that have large balances, such as adjustable-rate mortgages, student loans and home equity lines of credit." While you may not see the bills jump dramatically in short order, a steady rise in rates coupled with the long-term nature of these loans will "feel like death by a thousand paper cuts" over time, McBride said.
Mortgage holders who haven't refi'd: A few percentage points in interest can add up big over the long term, said Fite of Angel Oak Home Loans. Many Americans have found this out by refinancing their mortgages to cut down monthly payments. But unfortunately, if you didn't take advantage of super low rates in 2014 or early 2015, your window may have permanently closed to get those more favorable rates from several months ago.
Jeff Reeves is executive editor of InvestorPlace.com and the author of The Frugal Investor's Guide to Finding Great Stocks.