Here’s What Lower Interest Rates Mean for You
Today is the day we’ve all been waiting for!
After months of headlines… speculation… and volatile stock prices… the day has come for the Federal Reserve to finally cut interest rates.
So what does this mean for you?
Whether you’re a borrower, a saver, an investor, or a combination of them all… Today I’m going to fill you in on what the Fed’s big decision means for your money.
Let’s get to it!
Why’s the Fed Cutting Rates in the First Place?
After two and a half years of slowly raising interest rates, the Fed is now expected to cut rates for two primary reasons — global economic fears and inflation.
Global economic fears primarily refer to weak data from Europe and China, which are among the largest economies in the world.
The thought is that as these two major economies slow (which could be exacerbated by trade tariffs), the U.S. economy could soon become collateral damage.
And on the inflation side, inflation has simply remained low for too long in the Fed’s eyes. Therefore, their plan is to cut rates now to spur consumer spending, which in turn should boost inflation towards their 2.0% target.
So what does this mean for you? Let’s first talk about borrowers.
Here’s What Lower Rates Mean for Borrowers
As I mentioned above, one of the Fed’s goals of lowering rates is to spur U.S. spending.
This is done by making loans cheaper to both businesses and consumers. However, today we’ll just be focusing on consumers like you.
When it comes to mortgages, you’ll likely be paying a lower rate to finance your home. The average 30-year mortgage rate has fallen from 4.94% in November 2018 to 3.75% today.
I’m actually in the process of refinancing my own mortgage because of these lower rates!
The story is the same for auto loans. After peaking at 5% in December of 2018, the average U.S. auto loan now sits around 4.70%.
Credit cards are a different story, however.
Because credit card rates are more tied to a consumer’s credit rating, you’re unlikely to see your APR begin to notch lower. So keep this in mind before making any big purchases with plastic, as the “lower interest rate” headlines likely won’t apply.
Here’s What Lower Rates Mean for Investors
It’s a great time to be an investor as the Fed lowers interest rates. That’s because interest rates and stock prices usually move in opposite directions.
As interest rates fall, consumers take advantage of lower borrowing costs and spend more at some of our favorite publicly traded companies. This in turn boosts profits leading to higher stock prices.
Dividend stocks in particular have the most to gain as investors look to lock in reliable income streams in the form of dividend payments.
After all, rates offered in savings accounts surely won’t be rising anytime soon. Which brings me to my next point…
Here’s What Lower Rates Mean for Savers
Unfortunately, it looks like traditional banks and credit unions will continue to pay next to nothing on your hard-earned savings — 0.1% is the average according to Bankrate.
However, that doesn’t mean you should be content collecting the historically low “average” if you’re at the age where you should be kicking your interest income into high gear!
I recommend you check out non-traditional online banks like Vio Bank that pays 2.52% on savings… WebBank that pays 2.50% on savings… And even newly-formed Green Dot that pays 3.0% on savings!
And the best news is, these banks should continue to offer high rates for the foreseeable future as they’re more driven right now by the desire to attract customers… not by the Fed.
So there you have it. I hope today’s alert cleared up at least some of the confusion around today’s rate cut headlines.
Whether you’re a borrower, and investor, or a saver, today’s announcement will certainly impact your money.
Stay tuned to The Daily Edge as we continue following the action, while recommending the best investments to keep your money safe.
Here’s to growing and protecting your wealth!