How it affects your bank accounts, loans, credit cards, and investments

In many ways, gauging the impact of the Federal Reserve lowering interest rates is like predicting when ice will thaw. We know something’s happening, but it takes a while, and there’s not much to look at.

Bạn đang xem: How it affects your bank accounts, loans, credit cards, and investments

The Fed has cut short-term interest rates twice this fall, including a jumbo half-point discount to kick off the lower-rate season in September. Market watchers widely expect another quarter-point cut when the Fed meets Dec. 18.

So what results can we see? When it comes to your money — checking and savings accounts, CDs, mortgages, and other loans — it often takes fractions to measure the impact.

You may have noticed an incremental change in the meager interest you earn on your deposit accounts.

Many checking accounts pay a pittance — pennies on the dollar. Yet, the cash is moving in and out — mostly out? — of your account as you pay bills. It’s the convenience of liquidity that limits your earning power.

In other words, if your interest-earning checking account goes down from the current national average of 0.07%, it will be hard to notice.

Off-the-shelf savings accounts don’t pay much more. The latest average is under 0.50%, and it, too, is slipping lower. But this is not where savvy savers keep serious money.

High-yield savings accounts have been friendly money keepers during the period of higher interest rates — paying 4% to 5% or more. Now, they’re dropping below 5%, and some financial providers are posting rates below 4%.

This is one category where shopping really pays off. However, expect the contraction in these rates to continue.

Xem thêm : CFPB Student Loan Ombudsman: servicer errors plague student loan program

Dig deeper: 10 best high-yield savings accounts

If you have $10,000 or more that you want to keep on the sidelines but close by, money market accounts have been convenient — but low-paying. Interest nationally averages 0.66%.

Not much point to that.

A better option might be a high-yield money market account, where rates are still over 4%.

Read more: 10 best high-yield money market accounts

CD rates have been resilient, moving down just fractionally in recent months. A 12-month CD is averaging 1.83%, but you can find better deals if you’re willing to take the time to hunt them down — and park your money in a bank that may not be in your city.

Your minimum deposit and term will affect your rate.

Learn more: The best CD rates on the market

Mortgage rates have been the most stubborn of all. Home loan rates actually rose following the first Fed rate cut in September. Analysts said the Fed move was already “priced in” to mortgage rates.

Thing is, the Fed’s manipulation of overnight interest rates charged to banks doesn’t directly steer mortgage rates. Those are more influenced by the bond market, particularly the 10-year Treasury note. The bond market reacts to forecasts for economic growth — or the lack of it.

It will take more than incremental Fed interest rate reductions to bring down mortgage rates. Bad economic news can move rates down, such as a resurgence of inflation or a surprise recession. But who is hoping for that?

Xem thêm : Loan Brokers Market Opportunities and Strategies Report to

Housing industry analysts with the Mortgage Bankers Association, Redfin, Realtor.com, and Zillow expect mortgage rates to remain in the 6% to 7% range through 2025.

Dig deeper: When will mortgage rates go down? A look at 2025

Personal loan interest rates have been hovering in the 12% range for well more than a year. They were around 9.5% for three years, from 2020 to 2022. Like mortgage rates, it will take time for them to get close to that again.