From what you pay on the balance on your credit card to inflation, rates can have an influence on our everyday lives. When the economy dips, rates tend to dip as well. This encourages people to spend more which gives the economy a boost. Jerome Powell, chair of the Federal Reserve, makes the big decisions when it comes to the federal fund rate and due to recent trade war news and the overall global economy, he’s hinting that rates could be decreasing soon.
But how will this affect your wallet? If you have credit card debt or plan to buy a home in the near future, the rate cut can be a benefit. Most credit cards that have variable rates are linked to the prime rate so a federal funds cut would lead to lower interest rates. The lower the interest rate on your credit card, the easier it will be to pay that balance down so be sure to take advantage.
Though the federal fund rate isn’t linked to mortgage rates, it can have an impact on them. Whether your mortgage is a fixed-rate or an adjustable rate will determine the impact a rate cut would have on your savings. An adjustable rate will generally decrease when the fed rate decreases but a rate cut would have no impact on a fixed-rate mortgage. Lower rates are beneficial for potential home buyers and with a federal rate cut it would be a good time to purchase. Even if you’re not in the market for a new home it would be a great time to consider refinancing to take advantage of a lower interest rate! Please reach out to a Loan Officer near you to discuss all of your options!