A lot of economic advisers talk about the Federal Reserve, most often called the Fed, and if they will raise or lower rates. Just this past Wednesday, September 17, 2025, the Fed lowered rates from 4.25% to 4%. But, what does that even mean?

A lot of people think the Fed raises and lowers mortgage rates, or car loan rates, or whatever interest rate. That's not quite correct, but what they do does affect you and your interest rates. What the Fed raises and lowers is called the federal funds rate.

The federal funds rate is the interest rate that banks charge each other for short-term loans, set by the Fedto help steer the economy. When the Fedvlowers this rate, it’s like hitting the gas pedal to make borrowing cheaper across the board, encouraging banks to lend more freely. This doesn’t directly change your mortgage, car loan, or credit card rates—those are tied to different benchmarks like the prime rate or mortgage-backed securities. But here’s the deal: a lower federal funds rate reduces banks’ borrowing costs, which often nudges the prime rate down, and that ripple effect gradually makes consumer loans, including home mortgages, auto financing, and credit card APRs, more affordable. It’s not an instant switch, but it flows through the economy over time, putting more money back in your pocket.

So, over the next few months you should see mortgage rates, car loan rates, credit card rates, starting to nudge down. Also, the Fed has mentioned that they are looking at more rate cuts before the end of the year. That should put a little fuel into the economy and rev things up coming up in the next few months!

Johnny T