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5 ways lower interest rates might affect you

When the Federal Reserve lowers its target interest rate, the change affects consumers too. The Federal rate helps determine the interest you pay on loans and earn on savings, so it matters to just about everyone. Here’s what might change when rates fall.


If you have a fixed-rate mortgage, you won’t be affected by the change. However, if your mortgage has an adjustable rate, your rate and payments will likely decrease. If you’re planning to refinance a mortgage or searching for a new fixed-rate loan, doing so during a period after the Fed has trimmed rates might allow you lock in lower interest.

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A low interest rate environment is good news for those looking to finance a car because you can borrow money more cheaply. People with higher interest car loans might benefit from refinancing if rates drop, depending on how big the difference is. Lease rates are likely to go down too.

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The annual percentage rate (APR) of most credit cards is variable. That means a decrease in federal rates will likely lower the interest you pay on your account balance, which may make it easier to pay down debt more quickly.

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Interest rates on federal student loans are fixed, so those rates remain locked. If you’ve taken out private loans, however, your interest payments could decrease. Whether your loans are private or public, a lower interest rate environment might be a good time to check your options for consolidation to see if you can get a lower overall rate.

While lower rates make it easier to borrow money, they also lower the rates banks pay customers in savings vehicles such as CDs, money market and basic savings accounts. Don’t expect an immediate, dramatic change, though; rates tend to move gradually.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.

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