What to Know About Increasing Interest Rates and Their Impact on Variable Rate Loans


In an effort to curb inflation, the Federal Reserve has enacted the first of seven planned interest increases we will see in 2022. And banks and lenders will respond in turn.

So, let's unpack how those rising rates will impact your professional and personal finances.


Credit Cards

The Fed raising interest rates means credit card providers will most likely follow. Luckily and unluckily, this will only affect consumers who carry a credit card balance and some credit card debt. If you pay off your credit card statement every month, then nothing will really change for you.

For those carrying debt, Sean Pyles, debt writer and podcast host over at NerdWallet, suggests applying for a 0% balance transfer card. While it may seem counterintuitive to apply for a credit card while trying to offload current credit card debt, it will actually save you money in the long run. Find a card that offers a 0% APR introductory period, which depending on the creditor, usually last 12 to 24 months, and transfer the debt over. As long as you qualify for the balance transfer card and can make the minimum payment every month, you won't be charged interest during that time period.

Keep in mind that most credit card companies may charge a 3% balance transfer fee. So, make sure you can pay off a good chunk of the balance before the 0% offer ends to make the interest savings worthwhile.


Savings Accounts and CDs

You'll get a better return from bank savings accounts and Certificates of Deposit.

Savers prevail! Money stashed away in bank accounts and CDs will be getting an interest boost — especially if you are banking at a community bank who values depositors more than larger financial institutions. Certificates of Deposit have been a go-to option for all generations, for generations. The reason being is because no matter the state of the stock market — crashing, burning, simmering, flaming, idling, etc. — you'll get your money back, plus interest.

Check out Flagship Bank's updated rates here.



From the ongoing pandemic, supply chain crises, and fluctuating unemployment rates and energy prices, the stock and bond markets react to it all. Your portfolio should already have a balance of riskier investments (stocks) and more stabilizing ones (bonds), to remain steadfast in rocky periods like these. Generally, when the Fed raises rates, it may be a sign that the economy is improving. So, even though bond investors worry what rising rates do to the price of their existing bonds, you'll end up with higher returns in the long term. 

In conclusion, it is hard to say what effect higher interest rates will have on investments, but investors should be closely watching for any hints of the Fed speeding up or slowing down the next increase.


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Variable-Rate Loans

Depending on your loan's terms and conditions, you should expect to see higher interest rates on any of your current and potential variable-rate loans including mortgages, student loans, personal loans, auto loans, and more. 

Home Loans

For 90% of homeowners that have a fixed-rate mortgage, you are protected against the the rising interest rates. For those that have home equity lines of credit (HELOC) and adjustable-rate mortgages, you can expect to see higher monthly payments headed your way.

The good news? Though interest rates are higher than last month, they are still historically low. That means now is the time to lock-in at a low fixed-rate mortgage, whether that be through an application or a refinance.

Student Loans

Federal student loan borrowers are not affected by the rising interest rates because those loans carry a fixed rate set by the government. Private student loan borrowers, however, should expect to pay more. Both fixed and variable rate loans are linked to the federal fund rates, so variable is likely to increase first, and fixed will follow. These rates will continue to rise over the next few years.

Another bout of good news though? President Biden just recently extended the freeze on federal student loan repayments until August 31, 2022.

Car Loans

Cost of used and new cars alone have been through the roof, so auto interest rates have taken a backseat in the buying decision process. And it will continue on that trend — at least for now.  Your car interest rate is influenced by factors beyond the Fed including credit history, vehicle type, down payments, and more. This, in addition to car payments at an all-time high since 2012, means that the interest rate increase is not likely to make a meaningful impact on individual car loans.


The beginning upticks in interest rates are putting consumers at a door of opportunities. From refinancing an existing variable rate loan or taking out a new one, to opening a CD or altering an investment strategy, the time to act is now.  Find out how Flagship Bank can help you navigate this interest rate transition.

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