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Variable-rate home loans not problem yet The Fed raised the Federal funds interest rate one quarter-point to 1.5 percent Tuesday. CBS Markeetwatch noted the hike will only add about $125 a year for a $25,000 balance. For a $100,000 balance, the hike would be higher: $500 more a year. Also, the larger monthly payment from the higher interest rate is tax-deductible. The Fed would have to increase the rate much farther to close the nearly 3 percent interest rate difference, one analyst said. The average U.S. interest rate for a $30,000 five-year, fixed-rate home-equity loan is 6.55 percent right now, while a $30,000 home-equity line of credit has an interest rate of 3.65 percent, according to Bankrate.com. Home-equity credit lines are more flexible than fixed-rate home loans, since homeowners can borrow what they need instead of borrowing the full amount and starting to pay interest right away, said one analyst.
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