What could a Federal Reserve rate cut mean for your wallet?
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The Federal Reserve is widely expected to lay the groundwork for a September interest-rate cut at the conclusion of its meeting on Wednesday, offering some reprieve to Americans who have been squeezed by sky-high borrowing costs.
Lower interest rates could ding savers, but borrowers would likely face smaller debt payments on everything from credit cards to mortgages to student loans.
While the federal funds rate is not what consumers pay directly, it affects borrowing costs for home equity lines of credit, auto loans and credit cards. Higher rates have helped push the average rate on 30-year mortgages above 7% for the first time in years. Borrowing costs for everything from home equity lines of credit, auto loans and credit cards have also spiked.
In fact, housing affordability is as bad today as it was during the peak of the 2008 housing bubble thanks to the astronomical rise in mortgage rates.
FED'S POWELL SAYS OFFICIALS WON'T WAIT UNTIL INFLATION REACHES 2% TO CUT RATES
But if the Fed proceeds with a September rate reduction, that could help mortgage rates to shift lower, according to Jacob Channel, senior economist at LendingTree.
A pedestrian passes the Marriner S. Eccles Federal Reserve building in Washington, D.C. on June 3, 2023. (Photographer: Nathan Howard/Bloomberg / Getty Images)
The Atlanta Fed's Housing Affordability Monitor, which compares median home prices and other housing costs to median household income, indicates the median U.S. household would have to spend about 39.8% of its income to afford the median-priced house as of February,
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