The Federal Reserve’s massive interest rate cut Wednesday should lower rates on home mortgages, auto loans and credit cards, but cash-strapped consumers shouldn’t expect immediate relief, financial experts say.
“It will most likely take some time, as there is known to be a lag effect after interest rates change in a certain direction,” Mahoney Asset Management CEO Ken Mahoney told The Post.
Central bankers cut the rate by 50 basis points (the first cut since 2020) after it spiked to the highest level in 23 years, and are expected to cut rates twice more this year.
However, most loans have fixed interest rates, so consumers with this type of debt will not benefit from rate cuts unless they refinance their loans or take out new ones. According to Richard Barringtonfinancial analyst at Credit Sesame.
It typically takes 30 to 90 days for consumers to feel the full impact of interest rate cuts, Ted Jenkin, co-founder and business consultant at oXYGen Financial, told The Post.
Within the first 30 days, home equity lines of credit, credit cards and personal loans should have lower rates, Jenkin said.
“The cuts could help free up $50 to $100 a month in additional cash flow, depending on household debt, which can help people fill up at the pump or pay for their groceries,” Jenkin said.
Americans are also likely to see auto loan rates decline, Cody Moore, director of growth strategies at Wealth E&P, told The Post.
“Car buyers could see auto loan rates drop below 8% in the next 30 days,” Jenkin said.
The housing market, which has been experiencing limited supply, will begin to move again, but it will take more time.
The Federal Reserve’s benchmark rate does not set or directly correspond to mortgage rates.
But it has an important indirect influence, and both “tend to move in the same direction,” LendingTree’s Channel said.
Those looking to buy a home, or refinance after locking in a mortgage that soared to more than 7%, will likely have to wait about 90 days before seeing a significant drop in interest rates. current average of 6.46%analysts said.
“If mortgage rates fall below 6%, we could finally start to see the doldrums in the housing market release,” Jenkin said. “Those who were stuck in historic COVID-era mortgage rates of 3% may start to see mortgage rates at a level that would allow them to sell and move up.”
