FX: The impact of interest rate hikes on Americans may be limited! Moody's: Consumers are hiding in this "safe haven"

According to the survey,The Federal Reserve's historic rate hike may not have actually hit most Americans that hardThis is becauseMost household debt is likely to remain locked into lower fixed interest ratesIt is not affected by the Federal Reserve's aggressive interest rate hikes at all.

According to Moody's Analytics, as of Quarter 1 this year,Only 11.1% of household debt is subject to floating interest ratesThis means that over the past year and a half, only a fraction of the cost of outstanding household debt has been raised as market interest rates have risen. 

In 1997 and 2000, the ratio was close to 27% and 25%, respectively, but it has been steadily declining over the past two decades. From the Great Recession of 2008 until last year, the Federal Reserve kept interest rates at historically low levels, leading many Americans to lock up all kinds of fixed-rate borrowing at much lower rates than those offered today.

This saves them a lot of pain, because the cost of floating-rate debt is regularly reset as the base rate rises.Americans have avoided the worst of Federal Reserve tightening。

 Moody's deputy chief economist Cristian deRitis said on Monday:

"U.S. households have been largely unaffected by the Fed's rate hikes because most consumer debt is fixed-rate and most of it is mortgages."

He pointed to another data from consumer research agency Equifax,Nearly 70% of mortgages offer interest rates below 4%.He said:

"Even with the increase in the federal funds rate, the monthly mortgage payments of existing borrowers have not changed. Most auto, student and personal loans have fixed interest rates, which further insulates borrowers from interest rate increases."

 Although many American households will not be immediately affected by the rise in interest rates,Rising interest rates have had a significant impact on products such as credit cardsThis could lead to higher credit card delinquency rates 

Last Thursday, the Federal Reserve announced a 25 basis point rate hike, taking the federal funds rate to a range of 5.25% -5.50%, and Federal Reserve Chairperson Jerome Powell insisted that the battle against inflation was still not won. Meanwhile, markets are acting as if this is the last rate hike of the year, and they expect policymakers to start "turning" in early 2024.

FXTFX said that while the Federal Reserve's rate hike campaign may be over, anyone who took out a floating-rate loan, such as a home equity loan, a new personal line of credit, or certain auto loans, before the Fed began raising interest rates could face higher debt costs today. 

At the same time,Due to the high interest rates, at least some Americans may have decided not to apply for a loanIn addition, in recent months,Loan rejection rates are also on the riseDeRitis says:

"Some borrowers seeking new credit have opted out of access to additional credit as a direct result of rising interest rates, and tighter lending standards and a sharp increase in rejected credit applications could further constrain future credit."