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Fed Cuts Interest Rate for First Time in 11 Years. What Does It Mean to You?

August 12, 2019 Written By: Jaymi Naciri

The Federal Reserve just cut interest rates for the first time in 11 years. So what does that mean for consumers, especially those who are looking to buy a home? Wersquo;re breaking it down.nbsp;

Mortgages

Itrsquo;s important to remember that mortgage rates arenrsquo;t set by The Fed. And, as Bankrate puts it. ldquo;The Fedrsquo;s influence over mortgage rates is complicated.rdquo;nbsp;

Mortgage rates are already below 4 as we write this, and they ldquo;arenrsquo;t likely going to respond quickly to a Fed rate adjustment,rdquo; they said. ldquo;Any further movement in mortgage rates will be tied to the outlook ahead. Thatrsquo;s because mortgage rates are more more closely follow long-term yield, like the ldquo;10-year Treasury yield, which serves as a benchmark to the 30-year fixed mortgage rate.rdquo;

Credit Cards

If you have a lot of credit card debt, you may see a little >Savings Accounts

When you look at the potential savings in one big lump spread among households across the country, the number looks substantialmdash;ldquo;Considering that thenbsp;average household currently owes 8,390, credit card users would save roughly 1.5 billion in interest as a result of a quarter-point rate cut,rdquo; said CNBC. ldquo;However, that may result in little benefit per cardholder with APRrsquo;s still near record highs. For example, a customer with a credit card balance of 1,400 at a 14.4 rate would only see their financing charge decrease by about 30 cents each month.rdquo;

You may see the yield on your savings account drop. ldquo;Prior to the Fed cutting rates on Wednesday, the average interest rate among online banks was 1.69, as opposed to an average of 0.28 offered by brick-and-mortar banks,rdquo; said CNBC. Thatrsquo;s according to annbsp;analysis of savings accounts conducted by DepositAccounts.com in June.rdquo;

Interest on online-only savings accounts could drop as much as 0.11, according to WalletHub CEO Odysseas Papadimitriou. But these still may be your best bet for a high yield. ldquo;Savers looking for a higher return might consider online savings accounts, which,nbsp;in many cases, are still paying yields of 2 to 2.5 percent,rdquo; said the New York Times.nbsp;

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