Why Fed Rate Cuts Don’t Instantly Reduce Your Borrowing Costs

The Federal Reserve recently cut its benchmark interest rate for the first time this year, signaling more reductions could follow. But for everyday borrowers, lower Fed rates don’t always mean lower borrowing costs right away. In fact, mortgage rates are forecast to rise before year-end.

Mortgages

Mortgage rates don’t move in lockstep with Fed cuts. Instead, they track 10-year Treasury yields, which reflect economic expectations. While the average 30-year mortgage rate recently dipped to 6.26%, the Mortgage Bankers Association expects it to rise to 6.5% by year-end.

Credit Cards

Credit-card rates adjust more quickly because they’re tied to the prime rate. Still, the impact is minimal—on an average balance ($6,473) at 22%, a quarter-point Fed cut lowers the monthly payment by about $1.

Car Loans

Auto loan rates have hovered around 7% for new cars and 10.7% for used vehicles. A Fed cut could help, but broader factors like loan terms, delinquency rates, and car prices also play a big role.

Savings Accounts

Deposit rates tend to fall more slowly. Banks are cautious about cutting too fast, which means savers may hold on to relatively higher yields—at least for now.

The Bottom Line

Fed rate cuts may ease borrowing costs eventually, but the changes don’t happen overnight. Mortgages, car loans, credit cards, and savings each react differently, and the impact often depends on broader economic conditions.

Source: Why Lower Fed Rates Won’t Instantly Lower Your Borrowing Costs, The Wall Street Journal, September 25, 2025, https://www.wsj.com/personal-finance/interest-rate-cuts-mortgages-savings-credit-54bcf65e?st=Lv37iy&reflink=article_email_share

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