During its final meeting of the year, the Federal Open Market Committee (FOMC) announced that it will raise interest rates by half a percentage point, marking 2022’s seventh rate hike to tame inflation. While this may seem like a negative for consumers, there are ways to take advantage of the current heightened interest rate environment. To help you learn more about the best money moves to make after the latest rate hike, Fortune spoke with Daniel Tolomay, chief investment officer at Trust Company of the South, for insight.
“A higher Federal funds rate means banks’ borrowing costs are greater,” Tolomay tells the publication. “This gets passed on to consumers in the form of higher interest rates on things like auto loans and mortgages.” As a result, it may be a good idea to pay down your high interest debt as rate hikes mean increased interest rates, which could get in the way of hitting your financial goals.
“Annual percentage rates [APRs] on credit cards will rise quickly, which will make it more expensive to carry a balance,” explains Tolomay. “Similarly, home-equity lines of credit [HELOCs], which usually have variable rates, will become more expensive. Holders of adjustable-rate mortgages [ARMs] may see their rates adjust upward.”
The recent rate hike also creates ample opportunity to work on boosting your credit score. To do this, examine your credit score and see which areas are helping or hurting your score and then optimize accordingly. “While rates will rise broadly, it can be helpful to shop around for financing,” Tolomay says. “New car buyers can compare dealership terms to other lenders, for example. A mortgage broker can help compare rates and terms across lenders and help potential homebuyers lower their costs.”