Many Americans ho-hum about new Fed rate cut, survey finds

For all of the handwringing from government officials and economists regarding whether the Federal Reserve will reduce short-term rates again this year, many Americans just don't care, a Wallethub survey indicates.

Most people are expecting the Federal Open Market Committee to cut further at its meeting on Oct. 28 and 29, plus making what would be a third reduction in 2025 at its December gathering. This follows a 25 basis point reduction in the federal funds rate at the September meeting.

Much like what happened following that cut, mlonger-term ortgage rates should not move much, as the markets have already priced in the move, a Wallethub blog post declared.

After the Sept. 18 meeting, the 30-year fixed increased 8 basis points in two weeks, then retreated by 7 basis points, according to the Freddie Mac Primary Mortgage Market Survey. The government shutdown is considered a catalyst for that movement.

Why Americans are indifferent about Fed rate cuts

In a survey Wallethub conducted between Sept. 29 and Oct. 3, it found almost two-thirds of Americans either feel indifferent or upset about the Fed cutting interest rates, as compared to a little over one-third who are happy about lower short-term financing costs.

A slightly lower share, 59%, said another 25 basis point cut would not make a difference in their life.

The major factors in this attitude are the trillions of dollars in U.S. government debt with the high interest rate environment, said John Kiernan, Wallethub editor, in a press release.

"Many lenders are also becoming more selective, in response to a dicey economic forecast, so low rates are still hard to come by," Kiernan said. "This helps explain why a majority of people are either angry or indifferent about a rate cut and do not believe it will make a difference."

How a potential October cut is already helping mortgage borrowers

Even though the October meeting has not yet happened, the likelihood of an upcoming short-term rate cut has already decreased the cost of new mortgages by around 11 basis points, Wallethub calculated.

It means borrowers are saving $9,720 over the life of a 30-year mortgage, using an average home loan balance of $374,288.

In the blog posting, Wallethub said mortgages have fixed rates and are priced using "a far longer time frame in mind than other borrowing vehicles."

The usual benchmark for mortgages is the 10-year Treasury, whose yield is set by the market. Investors seem to already be pricing in any Fed activity, with the yield ending the trading day under 4% on Oct. 16 for the first time since April 4.

While going back above 4% on Oct. 17, during the next three trading days, it slipped back below that level. On Wednesday, the 10-year closed at 3.95%. The last time the 10-year closed this low was over a year ago, on Oct. 3, 2024.

Meanwhile the mortgage-Treasury spread remains way wider than the normal 180 basis points.

Lender Price data on the National Mortgage News website at 3:30 on Oct. 22 put the 30-year fixed at just under 6.4%, making the spread 245 basis points.

What are Americans concerned about

"A lot of people are too preoccupied with inflation to care about a quarter point rate cut, but the irony is that cutting rates too quickly could reignite inflation," Kiernan said.

About four out of every five consumers (78%) who participated in the Wallethub survey said now is not a good time to borrow, with two-thirds further arguing inflation is a bigger issue to them than the current job market.

In fact, 78% claimed they are more worried about inflation's impact on their finances than artificial intelligence stealing their job.