Federal Reserve Board Chair Janet Yellen announced Wednesday that the central bank would be adjusting the target range for the federal funds rate—a short-term interest rate at which banks lend money to one another when their reserves fall short—for the third time since the Great Recession, to a range of between 0.75 and 1 percent. The change sent the stock market soaring, but it also impacted a somewhat less visible slice of the economic pie: debt holders, who are predominantly female, black and Hispanic.
A rise in the federal funds rate boosts interest rates on various types of loans, including mortgages and credit card debt. In December, shortly after the Fed’s second rate increase, the average 30-year fixed mortgage rate hit 4.32 percent, a level not seen since April 2014. On March 9, it rose to 4.21, a high for the year 2017.
Depending on income, average monthly mortgage payments can total anywhere from just under $500 for those with salaries of between $20,000 and $30,000 to nearly $1,700 for those making more than $150,000 annually. That means for Americans with adjustable-rate mortgages, or potential homebuyers who haven’t gotten a mortgage yet, these small percentage changes can add up.
Minorities may have lower homeownership rates than their white counterparts, but black and Hispanic households tend to have substantially lower net worths and are, respectively, 105 and 78 percent more likely to end up with high-cost mortgages, according to a February 2016 study. That was true even when researchers controlled for factors like debt-to-income ratio and credit score. (International Business Times)