Here’s How Consumers May Benefit From Lower Interest Rates

Topline

The Federal Reserve on Wednesday opted to ease interest rates for the first time in months, leading the way for potentially lower mortgage rates, bond yields and a likely boost to cryptocurrency over the coming weeks.

Average long-term mortgage rates dropped to their lowest levels in months ahead of the central bank’s policy shift.

Key Facts

The central bank’s policymaking panel voted this week to lower interest rates, which have sat between 4.25% and 4.5% since December, to a new range of 4% and 4.25%.

How Will Lower Interest Rates Impact Mortgage Rates?

Mortgage rates tend to fall before and during a period of interest rate cuts: The average 30-year fixed-rate mortgage dropped to 6.35% from 6.5% last week, the lowest level since October 2024, mortgage buyer Freddie Mac reported. Borrowing costs on 15-year fixed-rate mortgages also dropped to 5.5% from 5.6% as they neared the year-ago rate of 5.27%. When the Federal Reserve lowered the funds rate to between 0% and 0.25% during the pandemic, 30-year mortgage rates hit record lows between 2.7% and 3% by the end of 2020, according to data published by Freddie Mac. Consumers who refinanced their mortgages in 2020 saved about $5.3 billion annually as rates dropped, according to the Consumer Financial Protection Bureau. Similarly, mortgage rates spiked around 7% as interest rates were hiked in 2022 and 2023, though mortgage rates appeared to react within weeks of the Fed opting to cut or raise rates.

How Do Treasury Bonds Respond To Lower Interest Rates?

Long-term Treasury yields are more directly influenced by interest rates, as lower rates tend to result in lower yields. When the Fed pushed rates to near zero during the pandemic, 10-year Treasury yields fell to an all-time low of 0.5%. As yields for Treasury notes decline, the cost of borrowing also decreases for consumers, leading to likely lower rates on borrowing for credit cards, businesses and vehicle purchases, among other loans.

How Will Cryptocurrency Benefit From Lower Interest Rates?

Cryptocurrency may be boosted by lower rates as Americans favor riskier assets while bonds and savings accounts yield less. The price of bitcoin surged during the pandemic as interest rates fell, rising from about $5,000 in March 2020 to around $69,000 by November 2021. In 2018, as the Fed opted for rate hikes, the value of bitcoin fell from around $20,000 to roughly $3,000. It’s unclear whether new rate cuts would send cryptocurrencies higher, however, as bitcoin, ethereum and other popular tokens have surged to record highs in recent months as the broader industry has benefited from looser regulations under the Trump administration.

Key Background

A looser monetary policy followed months of pressure from President Donald Trump, who has accused Fed Chair Jerome Powell of being “TOO LATE” while calling for significant rate cuts. Wall Street anticipated interest rates to be eased in recent weeks, following hotter-than-expected jobs data that indicated the labor market was degrading at a faster pace than projected, and inflation, which ticked up again in August while still above the central bank’s 2% goal. The Fed holds a dual mandate of full employment and stabilized inflation when considering interest rates, though Powell signaled last month the “shifting balance of risks” on the U.S. economy might “warrant adjusting our policy stance.”