The Fed just cut interest rates for the sixth time. Here’s why you’re not seeing much of a difference in your loans

<i>Delmaine Donson/E+/Getty Images via CNN Newsource</i><br/>Many interest rates on consumer lending products and savings vehicles haven't fallen by as much as the Federal Reserve's key lending rate since September 2024.

By CNN Newsource

Published December 10, 2025 12:30 PM

By Jeanne Sahadi, CNN

(CNN) — Thanks to its latest decision on Wednesday – its final one for 2025 – the Federal Reserve has now reduced its key overnight lending rate by 1.75 percentage points since it began its rate-cutting cycle in September 2024.

Since the Fed funds rate affects a ton of consumer lending and savings rates throughout the economy – directly or indirectly – it’s worth assessing whether the full magnitude of the Fed’s cuts (or at least the 150-basis-points drop prior to Wednesday’s decision) has filtered through to consumers over the past 15 months.

The answer in several instances – at least when you look at averages – is no.

Your savings

There was a time not so long ago when you could find savings rates of 5% with your eyes closed. That’s over, of course. But you can still find some low-risk ways to earn solid, inflation-beating returns on your cash.

Online high-yield savings accounts: While traditional savings account rates at large banks barely cross the 0% mark regardless of what the Fed does, online high-yield savings accounts at FDIC-insured banks have not fallen nearly as much as the 150-basis-points drop in the Fed funds rate prior to today’s move. Many still offer inflation-beating returns in the 3.4% to 4.2% range, according to Bankrate.com.

Ken Tumin, founder of DepositQuest.com, said the five big online high-yield savings accounts he tracks (at Ally, Amex, Discover, Marcus and Synchrony) have only fallen on average by 83 basis points. One reason why, he suggested, may be because financial institutions had started to lower rates ahead of the Fed’s first cut in 2024. But also, he added, the online banks can’t afford to lower their rates too much because they need to compete for deposits with the biggest banks.

Certificates of deposit: The story is similar with CDs. The average online 1-year CD annual percentage yield has only fallen by 55 basis points, Tumin said.

At Schwab.com on Wednesday, CDs of varying maturities, from three months to 10 years, offered rates between 3.62% to 4.19%.

Should the Fed decide to keep cutting rates next year, a no-penalty CD can be a good way to lock in a reasonable rate now and avoid the normal penalty you’d pay if you take money out of your CD before it matures, Tumin suggested. At Marcus, for instance, there is a 13-month no-penalty CD on offer at 3.95%.

That penalty is also a moot point when you a buy a CD through your brokerage, where you can choose from a wide array of bank CDs to find the best rate and term for your needs. The risk you face with a so-called brokered CD is an investment risk if you want to cash out before it matures. That is, you have to sell it and you may not get back as much as you paid for it.

Treasuries and municipal bonds: Treasury bills and notes, backed by the full faith and credit of the United States, are one of the lowest risk ways to earn a return while preserving your principal. And the interest you earn is typically exempt from state and local income taxes.

Treasury yields are influenced by the fed funds rate, but they also can move on economic and geopolitical concerns. As of Wednesday on Schwab.com, average rates for Treasury bills with maturities from three months to one year ranged between 3.64% and 3.71%. The rate on the two-year note was 3.62%. The average 10-year Treasury had a yield of 4.19%.

With an eye toward more Fed rate cuts next year, “returns on cash will continue to decline, making high-quality bonds with intermediate-term maturities more attractive for long-term investors,” analysts at LPL Financial said in their 2026 outlook.

High-quality municipal bonds also offer a tax break – interest earned is typically exempt from federal taxes, and if you buy a muni issued by the state or city where you live, it may be exempt from state and local taxes too.

Average yields on AAA-rated municipal bonds with durations of between three months and 10 years ranged from 2.15% to 4.15% on Wednesday at Schwab.com.

Money market funds: One area where rates have taken a hit in the past 15 months is money market funds, which invest in short-term, low-risk debt instruments.

As of December 9, the average annualized 7-day yield was 3.73%, according to Crane Data. That’s well below the roughly 5% average yield on offer in the summer of 2024.

But a low-cost money market fund can still provide a solid inflation-beating return for your cash.

Your debts

The fact that many consumer rates haven’t fallen as much as the Fed funds rate since September 2024 isn’t great news if you’re taking on debt.

But remember, when it comes to borrowing, Fed cuts aren’t the only way to lower your payments. The rate you get will also depend on your credit score, how much you’re borrowing and how much you shop around.

Credit cards: The average rate on credit cards has fallen to 19.83% as of last week, down about a percentage point from the 20.78% average in mid-September 2024, according to Bankrate.

Any cut in rates can save you money, but with rates so high already, the cuts won’t be enough to make your debt truly affordable.

Rather than waiting on the Fed, you would be better off applying for a low-fee 0% balance transfer card that can buy you up to 21 months to pay off your balance interest-free. If you don’t qualify for one, call your lender and just ask for a lower rate. Even if they knock it down by a few points that will still save you more than incremental cuts from the Fed.

Home loans: While mortgage rates have moved up and down in the past 15 months, as of last week, the average rate on a 30-year fixed rate mortgage was 6.19%, nearly identical to the 6.20% registered in mid-September 2024.

That’s because mortgage rates are only indirectly affected by Fed rate decisions.

“Mortgage rates are primarily influenced by long-term interest rate dynamics, which are shaped by the fiscal outlook, and the 10-year U.S. Treasury yield rather than just the Fed’s short-term policy rate,” LPL analysts noted in their 2026 outlook. “(They) are also influenced by the inflation outlook and growth projections.”

Given expectations for a weakening job market and possibly slower economic growth, LPL analysts expects those factors “to push investors toward safer assets like U.S. Treasuries, reducing long-term yields — the primary benchmark for mortgage pricing.” Their prediction: The average 30-year fixed mortgage rate could fall to the upper-5% range by the end of next year.

One area of home debt where rates have dropped noticeably is on variable-rate home equity lines of credit. As of last week, the average rate was 7.81%, according to Bankrate – well below the 9% to 11% registered 15 months ago. Home equity loan rates have also fallen – albeit more modestly. The average rate on a five-year HEL last week was 7.99%, below the 8.46% registered in mid-September 2024.

Auto loans: Average auto loan rates for new and used cars have only come down about half a percentage point since September 2024, far less than the drop in the fed funds rate, according to November 2025 data from Edmunds.com.

Two primary reasons may explain why, according to Joseph Yoon, Edmunds’ consumer insights analyst.

First, there traditionally has not been a one-to-one correlation between the Fed’s moves and car loans.

Second, the best promotional rates are typically offered for loans that don’t exceed 60 months. But the average length of a loan is now around 70 months. And, Yoon said, “Consumers are strained. They’re putting less money down, so have to borrow more,” Yoon said.

Not to mention that average new car prices have been going up, topping $50,000 for the first time in September.

End result: Average monthly payments have actually gone up a little, too, although perhaps less than they would have, had the Fed not cut at all.

To get the best and most affordable deal if you’re shopping for a new car, Yoon suggests looking at those that have been sitting on a dealer’s lot for more than 60 days. “That’s somewhere you may find a little value,” he said.

For new EVs, you might seek out dealers or manufacturers offering a discount equivalent to the EV tax credit you would have received, had it not expired in September.

And for used cars, “the best values right now are for used EVs coming off lease from 2022 and 2023,” Yoon said. “The technology for EVs is moving very quickly, so they’re depreciating very quickly. And that depreciation has already hit for those models.”