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

In many ways, measuring the impact of the Fed’s rate cuts is like predicting when the ice will thaw. We know something is happening, but it takes time, and there’s not much to look at.

As of today, the Fed has cut short-term interest rates three times this cycle, including a massive half-point discount to kick off the low-rate season in September. With today’s quarter-point cut, the minimum federal funds rate target fell from 5.25% to 4.25%.

A full percentage point lower and what results could 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 a gradual change in the little interest you earn on your deposit accounts.

Many checking accounts pay a pittance — pennies on the dollar. However, cash is moving in and out – mostly out? – From your account as you pay bills. It is the ease of liquidity that limits your ability to make profits.

In other words, if your interest-earning checking account falls below the current national average of 0.07%, it will be difficult to notice.

Ready savings accounts don’t pay much more than that. The recent average is less than 0.50%, and is also declining. But this is not where smart savers keep their big money.

High-yield savings accounts have been a good tool for saving money during a period of high interest rates — paying 4% to 5% or more. Now, interest rates are falling below 5%, and some financial providers are publishing rates below 4%.

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

Dig deeper: The 10 best high-yield savings accounts

If you had $10,000 or more and wanted to keep it on the margin but close by, money market accounts were convenient — but low-paying. The national average interest rate is 0.66%.

I don’t point it out much.

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

Read more: Top 10 High Yield Money Market Accounts

Interest rates on certificates of deposit have been resilient, declining only slightly in recent months. The average 12-month CD rate is 1.83%, but you can find better deals if you’re willing to take the time to chase them down — and put your money in a bank that may not be in your city.

The minimum deposit and term will affect your price.

Learn more: Best CD prices on the market

Mortgage rates were the most stubborn ever. Home loan interest rates actually rose after the Fed’s first rate cut in September. Analysts said the Fed’s move has already been “factored into account” for mortgage rates.

The point is that the Fed’s manipulation of overnight interest rates charged to banks does not directly guide mortgage rates. These are more influenced by the bond market, especially the 10-year Treasury bond. The bond market reacts to expectations of economic growth – or lack thereof.

It will take more than gradual interest rate cuts by the Fed to bring mortgage rates down. Bad economic news can cause interest rates to fall, such as a return of inflation or a sudden recession. But who hopes for that?

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 to 2025

Personal loan interest rates have been hovering in the 12% range for more than a year. It’s been around 9.5% for three years, from 2020 to 2022. And like mortgage rates, it will take some time for them to get close to that again.