The average rate on new car loans was 7.1 percent in May, according to Edmunds.com, up from 5.1 percent last year. Used-car rates were even higher: The average loan carried a 11 percent rate in May, up from 8.2 percent a year earlier.
Car loans tend to track the five-year Treasury note, which is influenced by the Fed’s key rate — but that’s not the only factor that determines how much you’ll pay. A borrower’s credit history, the type of vehicle, loan term and down payment are all baked into that rate calculation.
Rates on 30-year fixed-rate mortgages don’t move in tandem with the Fed’s benchmark rate, but instead generally track the yield on 10-year Treasury bonds, which are influenced by a variety of factors, including expectations around inflation, the Fed’s actions and how investors react to all of it.
Mortgage rates have been volatile. After climbing above 7 percent in late October — for the first time since 2002 — mortgage rates dipped close to 6 percent in February before drifting back up again to 6.71 percent as of June 8, according to Freddie Mac. The average rate for an identical loan was 5.23 percent the same week in 2022.
Other home loans are more closely tethered to the Fed’s moves. Home-equity lines of credit and adjustable-rate mortgages — which each carry variable interest rates — generally rise within two billing cycles after a change in the Fed’s rates. The average rate on a home-equity loan was 8.48 percent as of June 7, according to Bankrate.com, up from 4.45 percent a year ago.
Borrowers who already hold federal student loans are not affected by the Fed’s actions because that debt carries a fixed rate set by the government. (Payments on most of these loans have been paused for the past three years as part of a pandemic relief measure, and are set to resume by the end of the summer.)
But new batches of federal student loans are priced each July, based on the 10-year Treasury bond auction in May. And those loan rates have climbed: Borrowers with federal undergraduate loans disbursed after July 1 (and before July 1, 2024) will pay 5.5 percent, up from 4.99 percent for loans disbursed in the year-earlier period. Just three years ago, rates were below 3 percent.