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US bank loan, deposit rates slow to reflect Fed's 2018 rate hikes

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US bank loan, deposit rates slow to reflect Fed's 2018 rate hikes

Consumer loan and deposit rates are trending higher, but still significantly lagging the Federal Reserve's rate-hike cycle.

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Over the course of 2018, the U.S. Federal Open Market Committee raised the benchmark rate a full 1 percentage point, split evenly between four rate hikes. However, interest rates on even the most rate-sensitive loan products have increased by much less.

Average rates on one of the most rate-sensitive products, the home equity line of credit, increased by 69 basis points from before the March 2018 hike to 5.51% as of Jan. 4. Meanwhile, average interest rates on 30-year and 15-year mortgages have increased by 37 basis points and 41 basis points over the same time period, to 4.80% and 4.32%, respectively.

Rates have been even slower to react on the deposit side.

The average rate on a five-year $10,000 CD grew by 48 basis points since the rate hike in March 2018. The average rate for $100,000 in a money market deposit account rose by 19 basis points, while the average rate for a $250,000 MMDA rose 22 basis points. The average rate on $1,000 in a savings account grew by 4 basis points to 0.18%.

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According to S&P Global Market Intelligence data, the average rate for a $25,000, 60-month new car loan as of Jan. 4 was 4.42%, up 38 basis points since before the March 2018 rate hike. The average rate on a 36-month used car loan also increased by 38 basis points over the period.

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Following the December 2018 rate hike, the Fed said that it will likely increase rates two more times in 2019.

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