Borrowers who have been hoping for much-lower-rate loans could be disappointed in the new year.NEW YORK — The Federal Reserve’s third interest rate cut of the year will likely have consequences for debt, savings, auto loans, mortgages and other forms of borrowing by consumers and businesses.But with inflation pressures still elevated and with concern that President-elect Donald Trump’s policies could fuel inflation, the Fed indicated Wednesday that it’s likely to cut rates more gradually in 2025 than it had projected three months ago. The policymakers now envision two rate cuts next year, not the four they predicted back in September.The result is that borrowers who have been hoping for much-lower-rate loans could be disappointed. Loan rates may barely budge if the Fed sticks with its plan to cut its key short-term rate only twice next year.“This could be the last cut for a while,” said Jacob Channel, senior economist for LendingTree. “Because the upcoming Trump administration’s policies might cause a resurgence in inflation or otherwise throw the economy off balance, the Fed might choose to take a wait-and-see approach and hold rates steady at their January meeting.”Depending on the specific proposals the Trump administration manages to enact, the Fed could hold off on any additional cuts until March or even later.Here’s what to know:“Another rate cut is welcome news at the end of a chaotic year, but it ultimately doesn’t amount to much for those with debt,” said Matt Schulz, chief credit analyst at LendingTree. “A quarter-point reduction may knock a dollar or two off your monthly debt payment. It certainly doesn’t change the fact that the best thing cardholders can do in 2025 is to take matters into their own hands when it comes to high interest rates.”The average annual percentage rate on a new credit card offer, according to LendingTree, is 24.43%. In September, it was 24.92%. Further modest declines in that rate, Schulz said, are possible in the next few months.But, he cautioned, “Anyone expecting card rates to go from awful to amazing overnight because of the Fed is going to be sorely disappointed.”Elizabeth Renter, senior economist at NerdWallet, said that particularly for credit card users who carry debt from month to month, “It’s a drop in the bucket for anyone feeling pressure from high rates.”For savers, returns on high-yield accounts have dropped, too, in tandem with the Fed’s rate cuts. So while these accounts are not quite as attractive as they had been, they might still be worth investigating if you haven’t shopped for one recently. Some of these accounts offer yields at or near 5%.“Yes, you’ve missed the peak rates seen a few months ago,” Schulz said. “But even at these levels, they’re still likely higher than what you’ll find at a traditional bank.”Though the Fed doesn’t set mortgage rates, it does influence them. Long-term mortgage rates generally track the yield on the 10-year T
Dom. Dic 29th, 2024
