The Federal Reserve on Wednesday announced its second consecutive interest rate cut, bringing the benchmark interest rate to the lowest it’s been in three years.
The quarter-point rate cut passed in a 10-2 vote, taking the rate down to a range of 3.75% to 4%, which is the lowest it has been since late 2022.
Following the interest rate cut, U.S. stocks were higher Wednesday afternoon.
According to CNN, the Dow was up 0.25%, the S&P 500 was up 0.15% and Nasdaq was up 0.5%.
This is the second time the Federal Reserve has lowered the rate this year, after it was cut in September. Fed Chair Jerome Powell said in a news conference on Wednesday that it is not guaranteed there will be another rate cut at the next meeting in December.
How this will impact the rates people see
Here’s a look at how this interest rate cut will impact the rates people see for their credit cards, mortgages and other loans.
Mortgages
Mortgages make up the biggest share of consumer debt, but because they are longer-term loans, they are less impacted by the Fed’s interest rate, per CNBC. Both 15- and 30-year mortgage rates are fixed for the duration of the loan, so most homeowners won’t see an immediate impact from the rate cut.
Mortgages do have close ties to Treasury yields and the economy, so homebuyers could benefit if the expectation of future cuts puts downward pressure on mortgage rates.
Credit cards
According to CNBC, credit cards are a top source of unsecured borrowing, and 60% of credit card users carry debt from month to month. Currently, credit card rates are near an all-time high, with an average of more than 20%.
Because most credit cards have a variable rate, they are directly connected to the benchmark set by the Fed. When the Fed lowers rates, this causes the prime rate to come down and the interest rate on credit cards could adjust within a billing cycle or two.
Even with the Fed rate cut, credit card APRs will still be extremely high.
Auto loans
Because auto loans, like mortgages, have a fixed rate for the life of the loan, car buyers will mostly benefit if borrowing costs come down in the future, according to CNBC.
Interest rates aren’t the only factor with auto loans, though — high prices of cars and tariffs have made car shopping less affordable.
Student loans
Most people with student loans won’t immediately be affected by the rate cut because federal student loan rates are also fixed, per CNBC. The rate for new loans resets once a year on July 1.
It is possible that as rates fall, borrowers with fixed-rate student loans could eventually be able to refinance into a less expensive loan.
Savings rates
For savings accounts, the central bank has no direct influence on deposit rates, but yields do tend to correlate with changes in the target federal funds rate.
“Yields on high-interest savings accounts and CDs are only going to keep dropping,” said Matt Schulz, LendingTree’s chief credit analyst, per CNBC. “It is likely time to act to lock in today’s high rates.”