How Does the Fed’s Decision on Rates Impact You?

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Steady Interest Rates Have Their Pros and Cons

Last week, a decision was made by the Federal Reserve to keep interest rates between 2.25% and 2.5%. This means that, for now, investors can expect rates to stay steady. This wasn’t a united decision, however, which indicates that changes are likely around the corner.

What does a steady interest rate mean for investors? It eases fears of an economic slowdown, but also has a daily impact on personal finances. Let’s take a look at how this decision could affect savings, mortgages, credit cards and student loans. 

No Changes to Savings Earnings

Economic growth has provided individuals keen on saving money with high-interest options, some accounts offering as much as 2.5% annual percentage yield. While the Reserve’s decision to keep things as they are means savers won’t experience an additional increase in their interest rates, it’s still good news. No changes means no decrease in rates which means there is still the option to put savings into a high-interest account.

Credit Card Rates Remain High

The downside of a decision like this is that credit cards rates remain high. In May of 2019, rates reached a record high, with consumers paying an average of 17% interest on this personal debt. 

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Unfortunately, dropping the benchmark rate wouldn’t have made that much of a difference anyway. Consumers would still experience an incredibly high cost of borrowing, Greg McBride, Chief Analyst at BankRate explains to CNBC.

Mortgage Rates Remain Low

There is good news! Mortgage rates are influenced by the decisions the Federal Reserve’s makes and right now home loan interest is the lowest it has been since late 2017. 

For homeowners, this means there’s still the option to refinance and grab one of these lower rate loans before the market changes. If refinancing makes sense for you, this could be a chance to lower monthly expenses by reducing interest payments.

No Effect on Student Loans

At this time, borrowers with private student loans won’t see changes to their interest rates. If the Federal Reserve does cut rates in the future, those who have a variable rate loan might see their rate decrease. This decision won’t affect many since a large portion of student loans are fixed-rate, federal loans.

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At times it feels as if the market is always in flux. For now, this Federal Reserve decision providers consumers with stability as they save for the future and might be a chance at a smaller mortgage payment.

~ Here’s to Your Financial Health!