MW Will a Fed rate cut really help your finances? What it would mean for mortgages, credit-card bills, savings rates and more.

Aarthi Swaminathan and Venessa Wong and Andrew Keshner

What house hunters, job seekers, credit-card users, car shoppers and cash savers should know

The first Fed cut of 2025 seems to be at hand. Don't get too excited.

The Federal Reserve is expected to cut its federal-funds rate by 25 basis points during its highly anticipated meeting this week to address growing concerns about the health of the U.S. economy. But most Americans won't feel a big difference, economists say.

The cut comes amid intense political pressure from President Donald Trump on Fed Chair Jerome Powell. Trump has repeatedly accused Powell of harming everyday Americans by not lowering rates. "Housing in our Country is lagging because Jerome 'Too Late' Powell refuses to lower Interest Rates. Families are being hurt because Interest Rates are too high," Trump wrote in a July post on Truth Social.

The Fed wants to keep inflation in check while addressing growing signs of weakness in the labor market: Revised figures from the Bureau of Labor Statistics last week indicated that the economy created 911,000 fewer jobs from April 2024 to March 2025 than previously reported.

For consumers struggling with rising unemployment as well as debt levels, a rate cut may seem like a much-needed bailout. But by and large, any immediate drop in interest rates will have little impact on overall consumer well-being, which has been stressed by years of rising prices, financial experts told MarketWatch.

Ultimately, cutting interest rates is "a step in the right direction for things, but it's not as though people can expect to see their rates start to come down broadly and across the board," said Tim Quinlan, senior economist at Wells Fargo $(WFC)$, referring to the interest rates consumers pay on things like credit cards and car loans.

Meanwhile, the other concern for consumers already facing affordability challenges is whether lower interest rates will "engender more inflation down the road," he said. If the Fed cuts interest rates, there is a potential risk that prices could rise even more.

Excluding the cost of financing, the prices of homes and cars remain near record highs. Despite a renewed focus on reducing consumption and increasing savings, credit-card balances are up, including among middle-income Americans. While the cost of borrowing is part of the affordability picture, high prices are putting pressure on consumers.

Half the respondents in a recent Morning Consult poll said interest rates are too high. But can they expect much relief if the Fed lowers rates? Here's what experts say a rate cut would mean for house hunters, job seekers, credit-card users, car shoppers and cash savers.

Home buyers are already seeing a drop in mortgage rates

Many house hunters may find that a Fed cut may not move the needle on mortgage rates. That's because mortgage rates typically rise and fall well ahead of the Fed's announcements.

Mat Ishbia, chief executive of United Wholesale Mortgage $(UWMC)$ , said in a video in early September that a rate cut would be a "positive" for the mortgage business. "It'll be a great marketing piece for all of us in the industry," he added. Many house hunters are under the impression that the Fed controls mortgage rates, but that's not the case.

The Fed does not directly set mortgage rates. Instead, those typically move in tandem with the yield on 10-year Treasury note BX:TMUBMUSD10Y. When investors expect the Fed to cut interest rates, based on how the U.S. economy is faring, they may increase buying of the 10-year note, which lowers its yield. A bond's price and yield move in opposite directions. That in turn pushes down the 30-year mortgage rate. That is what happened in the days leading up to the Fed's expected rate cut on Wednesday.

Investors are also expecting the Fed to buy up more mortgage-backed securities in the months ahead, which is also pushing down the yield on the 10-year Treasury note, and by extension, mortgage rates.

Read more: This long-shot move could get the 30-year mortgage rate to 5% next year, says BofA

So by the time the Fed actually cuts its benchmark rate, savvy home buyers would have already gone to their mortgage lender, locked in a relatively low mortgage rate and set off house hunting.

Financial institutions are also drumming up discounts to entice home buyers. For instance, Chase $(JPM)$ is offering a limited-term refinance discount, where if the buyer locks in a rate before Sept. 21 and meets the qualifying criteria, they can get a lower mortgage rate. In Michigan, one local credit union is even offering a 4.99% interest rate on new 30-year mortgages, according to the Detroit Free Press. That's a good deal, given that the average 30-year rate was 6.35% as of Sept. 11, according to Freddie Mac (FMCC).

Job seekers still have to keep looking

The weakening labor market has become the Fed's prime focus as rate cuts come into view. It's essentially become a no-hire, no-fire market, which may work fine for people holding on to their current jobs, but it's rough for unemployed job hunters. That search isn't likely to get much easier after any rate cuts, experts said.

"I don't think it's going to throw fuel on the dwindling fire of the labor market," said Chris Martin, lead researcher at Glassdoor. Even though the Fed has immense powers to raise and lower borrowing costs for consumers and businesses, Martin said the central bank may want to cut with caution instead of shocking markets. "They don't want a hiring bonanza," he said.

A Fed cut or even multiple cuts would result in more jobs than would be seen under no rate decreases, Martin said. But factors including the impact of the Trump administration's tariffs and tighter immigration rules make it tough to say how many jobs will come from rate cuts, he said.

More hiring could start happening by the end of this year or early next year as lower rates sink into employers' minds, according to Noah Yosif, chief economist at the American Staffing Association. The professional association of firms that place temporary and contract workers typically has an idea of where employer staffing needs are going.

That's good news for job seekers who are getting hammered by macroeconomic uncertainty. Having more clarity on employer borrowing costs matters, Yosif said. "Interest rates are only one piece of the puzzle, but they are a big piece of the puzzle."

Credit-card debtors won't get much relief

For the average person with a revolving credit-card balance, any move by the Fed will have only a minor impact on their debt payments. As Ted Rossman, a senior industry analyst at Bankrate, previously told MarketWatch, "Fed rate cuts won't meaningfully lower [consumers'] credit-card bills."

On the average credit-card balance of $6,473, a person who had been making minimum payments - which Rossman assumes is 1% of the balance, plus interest - at 20.12% interest would be in debt for 219 months and end up paying $9,426 in interest, he said. Even if the Fed cuts by half a point, at an APR of 19.62%, that person would still be in debt for 218 months and have total interest expenses of $9,174.

The best approach, he said, is to pay off any card balance in full.

Related: 5 mental tricks to reset your relationship with credit cards as Americans pile on debt

Car shoppers still see high prices

After a Fed rate cut, rates for vehicle loans won't immediately decrease, "as they are tied to longer-term Treasury yields that remain elevated," according to a September report by Cox Automotive. What's having a bigger impact on financing deals is the overall slowing in car sales generally, which is leading dealers to offer more attractive deals, particularly to buyers with good credit.

According to Cox, nearly 7% of consumers financing new cars at dealerships in July locked in a 0% APR. By late July, the average loan rate for a new car was 9.06%, down 61 basis points year over year, and for buyers with credit scores above 760, the rate was down to 5.4%, the lowest since September 2022.

"Rates will be highly variable based on credit score. We are seeing that rates for subprime buyers continue to stagnate and even rise by a slight amount, but individuals with prime and superprime credit scores are enjoying much better rates," Erin Keating, Cox executive analyst and senior director of economics and industry insights, told MarketWatch.

Rather than wait for Fed decisions to impact loan rates, "consumers can secure even lower auto loan rates by improving their credit tier by one level, or approximately 100 points," the Cox report said.

Cash savers get less interest

In recent years, the silver lining of higher interest rates has been a better return on cash investments, including savings accounts, bank certificates of deposit and money-market mutual funds. Savers loved the idea of getting yields of 4% and 5% on low-risk, liquid investments.

The anticipated Fed rate cuts will reduce the reward for putting money in these products. Some banks are already trimming their rates instead of waiting for the Fed, which also happened in the lead-up to the central bank's rate cuts last year.

"For a lot of savers out there, a lower fed-funds rate is actually not all that awesome," said Quinlan at Wells Fargo. "Lower rates for them actually means less interest earned."

But the context of the anticipated rate cuts may make it just as important to keep socking away cash in savings accounts, even with a lower interest rate. If the labor market keeps weakening - which the Fed hopes to avoid - people may need easy-to-tap cash as they search for jobs.

-Aarthi Swaminathan -Venessa Wong -Andrew Keshner

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

September 16, 2025 13:46 ET (17:46 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.