The Fed will likely cut rates soon — here’s how to boost your savings before that.
The Federal Reserve on Wednesday did not lower its key interest rate, which has been sitting at a 23-year high for the last 12 months. But officials continue to signal that the central bank may do so soon — most likely in September.
And the market expects that the central bank could continue cutting rates over the next two years. That means interest rates should decline on a wide swath of financial products, from credit cards and home loans to bank accounts, certificates of deposit and bonds, among others.
Given the many ways lower rates can affect your finances, here are some things to consider when deciding what steps to take in response.
Your Home
Getting a mortgage is one of the biggest financial moves most people make. Mortgage rates are influenced directly and indirectly by several economic factors, and the Fed’s moves are one. Since loan amounts are substantial, this is one area where even small rate cuts could make a meaningful difference in what a homebuyer will pay.
For those buying a home this year, you may be tempted to buy down points to reduce your mortgage rate. Before doing so, Diodato advised, crunch some numbers to make sure it will actually save you money if you think you’ll also be tempted to refinance in a year or two should rates drop further. That’s because you will pay thousands of dollars to buy down your mortgage rate now, and then thousands more in fees to refinance.
