GOBankingRates President: 14 Ways Your Wallet Could Benefit If Interest Rates Drop During Trump’s Presidency
Written by
Gabrielle Olya
Edited by
Molly Sullivan
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During a virtual address to the World Economic Forum, President Donald Trump called on the Federal Reserve to lower interest rates.
“I’ll demand that interest rates drop immediately,” he said during the address.
Whether or not Trump’s demands will actually be met remains to be seen. Just days after he called for lower interest rates, the Federal Reserve announced that it would be holding interest rates steady for the time being.
However, if Trump does eventually get his way, this could greatly benefit Americans’ finances, according to Jeff Bartlett, co-founder and president of GOBankingRates. Here are some of the ways Bartlett said lower interest rates could improve your finances.
Quicker Credit Card Debt Repayment
If you’re one of the many Americans with credit card debt, lower interest rates could make it easier for you to pay it off.
“Lower interest rates typically lead to reduced APRs on credit cards, which makes it easier for consumers to manage their debt,” Bartlett said. “Reduced APRs make it easier to pay down balances faster with less interest accumulation.”
Lower Prices
If Americans are able to spend less money paying down their credit card debt, they are more likely to spend that money elsewhere.
“With less money going toward interest payments, consumers may have more disposable income to spend, and businesses may lower prices to attract those price-conscious consumers,” Bartlett said.
Businesses may also lower prices as they pass savings on loans down to their customers.
“If borrowing costs for businesses decline, companies can finance expansion or capital improvements at a lower cost,” Bartlett said. “These savings can be passed on to consumers in the form of lower prices for goods and services.”
Reduced Mortgage Costs
If you have a mortgage, you may be able to reduce your monthly payments.
“Lower interest rates could make it a good time to refinance your mortgage, reducing monthly payments and potentially saving thousands of dollars over the long term,” Bartlett said.
Easier Debt Repayment
Those with multiple debts may be able to pay off debts more efficiently if they consolidate in a lower interest rate environment.
“Refinancing or consolidating high-interest debts, like credit cards and personal loans, into lower-rate loans can help lower monthly payments and reduce the overall interest paid,” Bartlett said.
More Affordable Loans for Big Purchases
Not only will lower interest rates benefit those with existing debts, but it will also benefit those who need to take out future loans.
“If you need to make a big purchase or investment, like a car or home improvement, you can secure a lower-interest loan, saving you money on interest,” Bartlett said. “If you’re in the market for a car, lower interest rates can help you secure a more affordable auto loan, reducing monthly payments.”
Real Estate May Be More Accessible
Having to put less money toward interest means you may now be able to afford to invest in real estate.
“With lower borrowing costs, it might be easier to purchase real estate, whether for a primary residence or as an investment property,” Bartlett said.
Competitive Rates on Bank Accounts
Although lower interest rates typically lead to lower APYs, Bartlett believes that many online institutions will still offer competitive rates.
“As interest rates drop, online banks and credit unions might still offer competitive rates on savings accounts and CDs, so your savings can earn more with less risk,” he said.
Savings on Student Loan Repayment
You may be able to get a better interest rate on your student loans if Trump were to lower interest rates.
“If you have federal or private student loans, refinancing them at a lower rate could lead to lower monthly payments and less interest paid over time,” Bartlett said.
Improved Credit Scores
If you’re able to pay off your debts more efficiently, this can increase your credit score.
“With lower interest rates, if you’re paying off debt, your overall credit utilization and payment patterns can improve, which could boost your credit score over time,” Bartlett said.
Increased Stock Market Returns
Interest rates can affect how people invest, and this could affect your portfolio for the better.
“Lower interest rates generally push investors away from safer investments, like bonds, and into equities, which could potentially increase stock market returns,” Bartlett said.
Cheaper Rent
Decreased interest rates can have a ripple effect that leads to lower rent prices.
“When interest rates drop, mortgage rates typically follow suit, making home purchases more affordable,” Bartlett said. “This can lead to a reduction in the overall cost of housing and potentially lower rental prices as landlords pass on savings to renters.
“With lower interest rates, property owners who have mortgages on rental properties may see lower monthly payments, which they could pass on to renters in the form of lower rents,” he continued.
Lower Electricity Bills
Lower interest rates can reduce energy costs, and these savings could be passed down to consumers.
“Interest rate cuts can lower borrowing costs for energy companies, enabling them to invest in infrastructure or renewables at a lower cost,” Bartlett said. “This can contribute to reduced energy prices, especially if the energy market is more competitive. These savings can be passed down in the form of reduced electric bills for consumers.”
More Affordable Groceries
Lower interest rates could make farming more affordable, which in turn could lower the costs of groceries.
“Lower interest rates could help farmers access cheaper financing for purchasing equipment or expanding production,” Bartlett said. “This could reduce the costs of farming, which could ultimately lead to lower food prices, especially in a competitive market.”
Cheaper Imported Goods
In addition to reducing the prices of domestic goods, Bartlett believes that lower interest rates can also reduce the cost of foreign goods.
“While lower interest rates can weaken a country’s currency — the U.S. dollar in this case — in some cases, a weaker currency could reduce the cost of foreign goods,” he said. “If interest rates are lowered and inflation expectations decrease, international suppliers may drop their prices, leading to reduced costs for imported goods.”
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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