Ask an Advisor: How do lower interest rates affect me?

If you haven’t heard, the Federal Reserve cut the Federal Funds Rate last month. The Federal Funds Rate is the rate at which financial institutions borrow from each other for their reserve balances. You might be thinking, “What does this have to do with me? I am not a bank.” While it might not directly affect you and your family, it most certainly will indirectly affect you in at least one of the following ways.

• New mortgages, auto loans, student loans, etc. will have lower interest rates. If banks and other lenders can borrow money at a lower interest rate, they will lend out money at a lower rate as well. This can be a great opportunity to refinance and/or consolidate debt.
• The interest rate of savings accounts will drop. Vice versa. If banks aren’t making as much interest on the money they have, they will drop the interest they are paying you. This can be a time to move money from a lower-yielding savings account to an investment account and/or pay off high interest debt.
• Fixed income prices will rise. The bonds in your portfolio have an inverse relationship with interest rates. When interest rates were being raised in 2022, bond prices fell. Now that interest rates are falling, bond prices will climb.
• It will be easier to qualify for loans. Since interest rates will be lower, monthly payments on debt will be cheaper. This will allow some who might not have been able to afford a house, business, car, etc. in the past to be able to afford that same thing now.

These are just a few ways interest rates come into play in your daily life. If you are curious on how a lower interest rate affects your financial house, call our office today at (615) 457-3481 or email me at caleb@wealthstrategiespartners.com so I can help!

Prior to making an investment decision, please consult with your financial advisor about your individual situation. The forgoing is not a recommendation to buy or sell any individual security or any combination of securities.