(nerd wallet) – The Federal Reserve hiked a base rate on Wednesday. As a result, mortgage rates are likely to rise, and home equity line of credit rates will certainly rise.

The Fed raised its target for the federal funds rate by 0.25%, or a quarter of a percentage point. Other interest rates are superimposed on the federal funds rate, notably the federal funds rate often charged by large banks on corporate loans. It too will rise by 0.25%.

Fed interest rates rise as a measure to fight inflation.

“It’s our job to bring inflation down to 2%,” Fed Chair Jerome Powell said at a news conference after a policymakers’ meeting in January.

With inflation well above the central bank’s target, the Fed is expected to raise the federal funds rate several times this year. The price started the year near 0% and federal funds futures traders are betting it will end the year above 1.5%, according to the futures market’s CME FedWatch tool.

How the Fed’s rate hike will affect homebuyers

Mortgage rates are likely to rise because they tend to move in the same direction as the federal funds rate. With the expected hikes, mortgage rates could trend higher throughout the year.

If you have already signed and have a purchase agreement for a house locked an interest rate, you are in good shape. The lender cannot increase your rate.

But if you’re buying or planning a home this year, mortgage rates can be higher if you accept an offer to buy. You can’t set an interest rate until after you’ve signed a contract to buy a home.

If mortgage rates go up significantly before you find a home, you may be shopping at a lower price point. Because higher interest rates weaken your purchasing power.

How much can you borrow for $1,500 per month (principal and interest)

Don’t buy too quickly just because mortgage rates are rising, warned Robert Heck, vice president of mortgages at online mortgage broker Morty. Prices, he said via email, shouldn’t be “the sole driving force behind whether someone should buy a home now.” Of course, prices play a role in the decision, but Personal and financial factors are paramount.

How the Fed rate hike is affecting mortgage refinancers

As interest rates rise, fewer homeowners have the option to refinance into a lower interest rate to lower their monthly payments.

But not everyone refinances to reduce their monthly payments. Many people choose cash-out refinancing: They refinance for more than they owe and take the difference in cash. This money can be spent on renovations, debt consolidation, college tuition, or other things.

Rising interest rates could reduce the loan amounts that cash-out refinancers can afford, since higher interest rates mean higher monthly payments.

A home equity line of credit is an alternative to cash-out refinancing, but HELOC rates will rise this year. The same is likely to happen with fixed-rate home equity loans.

How the Fed rate hike is affecting homeowners with HELOCs

The interest rate for a home equity line of credit, or HELOC, rises whenever the Federal Reserve raises the Federal Funds Rate, and by the same amount. So if the Fed increases the federal funds rate by a quarter of a percentage point, the rate follows a HELOC within a accounting cycle or two.

The HELOC rates are linked to the Federal Funds Rate, which in turn is linked to the Federal Funds Rate. For a HELOC balance of $50,000, a 0.25% increase in interest rate roughly translates to a $10.42 increase in monthly interest.

Interest rates on cash-out refinance, HELOC, and home equity loans are typically lower than interest rates on credit cards and personal loans, said Rob Cook, vice president of marketing, digital, and analytics at Discover Home Loans, per E- Mail. According to him, “This means that even as interest rates rise, using your home’s equity will continue to be a compelling option.”

How the Fed’s rate hike is affecting home sellers

If you’re selling your home, you’re likely to take offers more seriously when they come from buyers who have a pre-mortgage pre-approved. But to have confidence in a buyer’s ability to afford your home, make sure the pre-approval is based on current interest rates.

Why? Buyers who were pre-approved at yesterday’s lower rates may not qualify for the same amount of credit at today’s higher rates. So if you accept an offer from a buyer who ultimately doesn’t qualify for a mortgage, you’re wasting valuable time.

If interest rates rise significantly, you may be selling to someone in a higher income bracket than you originally marketed your home.