The Federal Reserve on Wednesday issued the third consecutive quarter-point interest rate cut this year — likely impacting everything from credit card rates and mortgages to online savings accounts.
Central bankers lowered rates to a new range of 3.5% to 3.75%, potentially bringing welcome relief to borrowers.
It’s possible consumers can expect to see a lower annual percentage rate, that is, the yearly cost of borrowing, for products like credit cards.
“If the APR is variable [on your credit product], you should see a drop in your rate. It won’t happen overnight, though, because there will be an adjustment period,” Erica Sandberg, consumer finance expert at CardRates.com, told The Post.
“Eventually fixed APRs may also decline, as well, so consumers may see the rates that are attached to new loans and credit cards across the board fall.”
Auto loans track the five-year Treasury Yield, but that is largely influenced by the Fed rate — so these could come down, too.
The dip is unlikely to have a sizable impact, though, since car payments are influenced by several other factors, including credit history, the type of vehicle and down payments.
Mortgage rates — which have been trending lower — could also continue to come down, according to experts.
Take, for example, a $320,000 mortgage with a 6.75% interest rate, which would cost about $2,450 in a monthly mortgage payment with total interest of $427,000.
If the interest rate was instead at 6%, the payment would be $160 less, and the total interest would be roughly $370,680 — saving the happy homeowner $56,320, according to Sandberg.
But mortgage rates are more closely tied to the 10-year Treasury yield, and could easily reverse course if inflation jumps higher.
“Mortgage rates are not tied directly to the Fed rate. In fact, each time the Fed cut rates this year, mortgage rates popped up a bit in the immediate aftermath, but then settled back down,” Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage, told The Post.
“By the time the Fed makes a rate cut, for the most part, the expectation is baked into the market. So it is really only in the case that they do something surprising that it could have a more drastic impact.”
Ken Mahoney, chief executive of Mahoney Asset Management, said rate cuts take time to work their way through the economy and actually be felt.
“Rate cuts generally create ‘easier money,’ and lower rates make for cheaper borrowing and credit, of course,” he told The Post.
“Yet at the same time, the Fed allowing for easier money actually may have an inverse effect on consumers than is intended.”
Mahoney expects longer-term rates to remain largely unchanged due to fears of inflation.
There’s also an inverse effect on online savings accounts, certificates of deposit and money market funds, where returns will move lower in step with Fed policy.
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