On Wednesday, the Federal Reserve is anticipated to maintain its current key interest rate, following a series of reductions that brought the rate down by an entire percentage point last year.
This decision means those in the market for loans might not see more favorable terms right away, but savers can enjoy stable returns on their savings accounts for a bit longer.
Given the current economic uncertainties, especially with President Trump’s policies on tariffs, immigration, and intended federal job cuts, economists believe it might be some time before the central bank opts for another rate cut.
The Fed’s benchmark rate is between 4.25 and 4.5 percent. Attempting to curb the high inflation, the bank aggressively raised rates from near zero to more than 5 percent between March 2022 and July 2023. As price pressures eased, the Fed shifted its strategy, cutting rates in September, November, and December.
Looking ahead, the Fed might hold off on further rate cuts if Mr. Trump’s policies continue to fuel inflation. Meanwhile, long-term interest rates set by the markets have been on a downward trend, impacting a wide array of borrowing costs for both consumers and businesses.
#### Auto Rates
Currently, auto loan rates are climbing, with car prices aplenty remaining steep, which challenges many buyers’ budgets. Even before the potential impact of U.S. tariffs that could push costs even higher. Car loan rates usually follow the five-year Treasury note yield, influenced by the Fed’s rate, but other factors impact what borrowers actually pay, such as credit history, vehicle type, loan duration, and down payment. Lenders are also tracking the rise in delinquencies on car loans, which is making it tougher, especially for those with lower credit scores, to secure a loan.
According to Edmunds, the average rate on new car loans reached 7.2 percent in February, up from 6.6 percent in December. In comparison, rates for used cars were even higher, with an average rate of 11.3 percent reported in February.
When shopping for an auto loan, it’s wise to secure pre-approval from a credit union or bank—such as Capital One or Ally, known to be significant lenders—before exploring dealership financing options. Focus on negotiating the vehicle’s price, including all fees, instead of monthly payments, as these can obscure the overall loan terms and total cost.
#### Credit Cards
Recent Fed rate cuts have slightly lowered credit card interest rates, yet reductions have slowed. Bankrate reported an average interest rate of 20.09 percent last week. However, the interest you pay heavily depends on your credit score and the type of card you hold; reward cards, for instance, typically have higher interest rates.
Last year, the Consumer Financial Protection Bureau highlighted that the 25 largest credit-card issuers had rates eight to ten percentage points higher than smaller banks or credit unions. This difference could cost the average cardholder an additional $400 to $500 annually. It might be worthwhile to check out smaller banks or credit unions for better offers, though joining some credit unions might require you to qualify based on where you work or live, though larger credit unions often have more relaxed membership criteria.
Before considering a switch, try negotiating with your current card issuer to match the best rate you’ve found and qualified for. If you do opt to transfer your balance, keep a vigilant watch on any fees and the interest rate post-introductory period.
#### Mortgages
Mortgage rates have experienced volatility, previously peaking around 7.8 percent late last year before falling to about 6.08 percent in late September. Despite some upticks due to solid economic data and looming inflation concerns from Mr. Trump’s policies, rates have remained somewhat steady recently.
Thirty-year fixed-rate mortgages generally align with the 10-year Treasury bond yield; several factors influence this, including inflation expectations, Fed actions, and market reactions. As of Thursday, the average rate for a 30-year fixed-rate mortgage stood at 6.65 percent, showing a slight increase from the previous week.
Other home loans, like home-equity lines of credit and adjustable-rate mortgages, see rates fluctuate closer to the Fed’s decisions. Prospective homebuyers should consider collecting several mortgage quotes in one day from different lenders, such as brokers, banks, and credit unions, to account for rate fluctuations.
Be sure to review the rate you’ll pay, any optional discount points, and lender-related fees. Comparing the “annual percentage rate” (A.P.R.) typically provides a clearer picture of total costs but check what is included in the A.P.R.
#### Savings Accounts and CDs
Financial products like online savings accounts, certificates of deposit, and money market funds usually move in sync with Fed policy. While the most lucrative yields may not be available now, online banks currently offer returns around 4 percent or more. According to Matt Schulz from LendingTree, the Fed’s current pause on rate cuts means these yields might remain high for some time, though not indefinitely.
Yield rates at traditional banks, however, have stayed relatively low even in this high-rate period. Bankrate recently reported the national average savings account rate as 0.6 percent.
Apart from rates, consider the bank’s history, minimum deposit requirements, and any related fees—while high-yield savings accounts typically don’t charge fees, others might. DepositAccounts.com, part of LendingTree, tracks rates across various providers and is a helpful starting point for comparisons.
For insights on money-market funds, refer to Jeff Sommer’s columns. The Crane 100 Money Fund Index, tracking the primary money-market funds, posted a yield of 4.14 percent as of Tuesday, down from 5.15 percent in February 2024.
#### Student Loans
There are two primary student loan types. Most borrowers first turn to federal loans, featuring fixed interest rates for the loan’s duration. These are also easier to access for younger borrowers and offer more flexible repayment options. Currently, undergraduates face a 6.53 percent rate, with unsubsidized graduate loans at 8.08 percent, and PLUS loans, used by both parents and graduates, at 9.08 percent. These rates are reset annually on July 1, determined by the 10-year Treasury bond auction in May.
Private student loans, however, possess more variability. Undergraduates often require a co-signer, and rates might be fixed or variable, largely influenced by credit scores.
When exploring lenders for private student loans, remember many banks and credit unions do not engage in these. Conduct extensive research, particularly focusing on those specializing in this field. Often, online advertisements may depict a diverse interest rate range, so you’ll need to share substantial personal information to obtain a precise quote.
