Falling interest rates: What can I expect?
When the Federal Reserve cut its benchmark interest rate in September 2024, it ended a two-year era of steadily rising rates.
At Adirondack Regional Federal Credit Union, whenever the nation’s central bank makes a move, we’re often asked:
Do federal interest rate changes impact our credit union accounts?
In theory, falling interest rates mean individuals and businesses can expect to incur lower costs for borrowing money. (Similarly, you’d expect the rates on investment products such as CDs and money market accounts to fall.) The rate cut refers to the Fed’s own funds rate, which reflects the interest rate at which credit unions and banks lend money to themselves. After the cut, that number now stands between 4.75 and 5.00 percent, the first time it’s fallen in four years.
In reality, though, rates at institutions serving the North Country haven’t budged much yet.
So what gives?
How Interest Rates are Determined
The rates customers pay depend on many different factors. Shorter loans incur lower rates than longer ones, and your own credit score also influences the rate you pay. (Customers with better scores typically represent lower risk, and get lower loan rates.)
Market conditions, though, play the biggest role. We analyze competitor market data on loan pricing to help inform our rate-setting decisions, ensuring a well-rounded approach. In a place like northern New York served by fewer banking institutions, we don’t face the same pressure to respond to rate changes overnight as financial institutions serving larger communities.
Over the long run, that means a more stable environment for you. Consider: Back in March 2022, when the Fed began increasing rates, it took nearly nine months before we finally followed suit on our loan products. For most of that time, our members paid far below the national average — saving you money.
How Adirondack Regional FCU Helps Keep Rates in Your Favor
For the time being, we’re holding the line on rates again. That goes for our share certificates, too: You can still deposit money at the same rate today as before the rate cut. Our new money special, for example, still pays 4.5 percent interest over 12 months. And our money market accounts have long been among the best deposit deals available. According to the Federal Deposit Insurance Corp., rates on money market accounts averaged between 0.03 percent to 0.15 percent nationally during 2020 and 2021. During that time, our Share 15 money market account consistently offered an interest rate of 1.25%, enabling our members to enjoy returns up to 50 times greater than the national average.
Have more questions? Feel free to reach out to our Vice President of Finance, Basel Farhat.