Navigating rate cuts from the Federal Reserve

A guide to financial opportunity

As the Federal Reserve eyes potential interest rate cuts, it's a good time for you to get financially savvy. While rate cuts are designed to stimulate the broader economy, they have a direct and often significant impact on your personal finances, from the loans you take out to the money you have in savings.

Here's a look at what Federal Reserve rate cuts mean for you and how you can prepare to make the most of this changing financial landscape.

The forecast: What to expect from the Fed rate cuts

Based on economic forecasts and recent Fed discussions, many experts anticipate the Federal Reserve will begin cutting rates later this year, with multiple reductions possible over the next several months. The primary goal is to encourage economic growth by making it cheaper for businesses and consumers to borrow money.

The good news for borrowers

For UCU members, a rate cut is great news if you are considering a new loan or have existing high-interest debt.

• Mortgages and Auto Loans: As the Fed lowers rates, it becomes less expensive for financial institutions to borrow money, a benefit they often pass on to consumers. If you've been waiting to buy a new home or vehicle, lower rates could mean a lower interest rate on a new loan and a more affordable monthly payment.
• Refinancing High-Interest Debt: This is a prime opportunity to save money on existing debt. If you have an adjustable-rate mortgage, high-interest credit card debt, student loans, or a personal loan from a higher-rate environment, refinancing could lock you into a lower, fixed rate for the life of the loan.

The challenge for savers

While borrowers cheer, savers may see a shift. When the Fed cuts rates, interest rates on savings accounts and money market accounts typically decline. This means your savings may earn a little less interest.

• Lock In Rates with a Certificate: To protect your savings from falling rates, consider a Certificate of Deposit. A certificate allows you to lock in a specific, higher interest rate for a fixed term. This is an excellent way to secure a strong return on your money before rates drop. UCU currently has two great certificate options, a shorter term Elite Earnings Certificate and a longer term Lock and Roll Certificate, designed to help you save more before rates drop.
• Explore High-Yield Savings: UCU and credit unions in general are known for offering competitive rates, and many provide high-yield savings accounts that may still offer better returns than traditional savings accounts, even after a rate cut.

Your action plan: Three key strategies

1. Pay Down High-Interest Debt: Take advantage of lower rates by paying down or consolidating high-interest debt, such as credit card balances. Every dollar you put toward your principal will go further, helping you become debt-free faster.
2. Evaluate Your Loans: If you have an existing loan, check with us to see if refinancing at a lower rate is a good option. The savings on monthly payments could be significant over the long term.
3. Optimize Your Savings: Don't let your money sit idly in a low-interest account. Consult with us to discuss a plan for your savings, whether that's locking in a certificate of deposit rate or moving money into a high-yield account.

The upcoming rate cuts present a perfect opportunity to review and improve your financial health. By being proactive, you can ensure that you and your family are in a strong financial position to benefit from the changing economic environment. Talk to us today to explore the best options for you.