The Fed's Key Inflation Rate Just Fell to a 3-Year Low

Supply and demand is also playing a role in some categories. Year-over-year shelter costs are up 4.9 percent, largely because supply is tight whether you are buying or renting a home. Rossman says home insurance premiums, which continue to surge due to higher losses brought on by climate change and rising costs for labor and materials, is also hurting home affordability. 

“As the largest line item in most household budgets, housing affordability or lack thereof plays a big role in the overall inflation story,” he says.

Mortgage rates are ticking up

Although the Federal Reserve cut its benchmark interest rate by a half point on Sept. 18, dropping its target range to between 4.75 and 5.0 percent, 30-year mortgage rates are going up in lockstep with a steady rise in 10-year Treasury yields, which have a bigger influence on mortgage rates than Fed actions.

The average 30-year mortgage rate clocked in at 6.72 percent this week, marking the fifth straight week of increases, according to Freddie Mac data. The bright spot? The Federal Reserve is expected to cut its benchmark rate again on Nov. 7, this time by a widely-projected 25 basis points. That would likely result in lower borrowing costs for home buyers, homeowners who want to refinance and older homeowners looking to tap into their home equity by taking out a home equity loan or a home equity line of credit.

Credit card rates will likely go down

If the Fed does cut the federal funds rate again at its next meeting, consumers should see credit card interest rates fall. That’s no small thing, considering that half of Americans carry a credit card balance from month to month, a recent Bankrate survey found. Boomers with credit card debt owe an average balance of $6,648, according to credit bureau Experian.

The average credit card interest rate is 24.7 percent, according to a LendingTree analysis of more than 200 credit cards from more than 50 issuers. Lower interest rates on credit cards could lead to big savings, depending on how much you owe and how diligent you are about paying off the debt.

Let’s say you owe $5,000 on a credit card and pay $250 a month. With a rate of 28.15 percent (the highest APR for new card offers, LendingTree says), you’d pay off the balance in 28 months and pay $1,828 in interest over that time. Drop the rate to 21.5 percent and you’d pay only $1,246 in interest and wipe out the balance in 25 months.

There's still time to lock in high-interest savings

Rising inflation may have squeezed older adults’ budgets, but it has been welcome news for savers who have dealt with more than a decade of near-zero returns. “Right now, with higher interest rates, savers are getting rewarded,” says Sarah House, a senior economist at Wells Fargo. “It’s a very different environment than five to 10 years ago.” 

While the national average savings account rate was just under 0.6 percent on Oct. 21, according to Bankrate’s most recent survey, there are still savings accounts that yield 5 percent or more. But you may not want to wait too long to lock in those rates. If the Fed continues to cut interest rates, you’ll likely see a negative impact on savings account rates.

New and used car prices are falling but …

Pandemic-era supply chain issues have been worked out and auto showrooms are well-stocked with inventory, which is why prices for new and used cars have been declining. The September CPI data shows new vehicles cost 1.3 percent less than they did a year earlier, and used cars and trucks are 5.1 percent cheaper. 

But you wouldn’t know it if you recently financed a vehicle purchase. With the average interest rate for a 4-year car loan at 7.4 percent for a new vehicle and 8.2 percent for a used car in late October, according to Bankrate, the total cost of car ownership remains elevated. 

“Financing is not included in the CPI calculator of vehicles,” House says. “You don’t get the all-in cost, and that plays into the disconnect. It’s still very expensive to purchase a vehicle when you factor in financing costs.” 

Not to mention, car insurance is getting more expensive, with rates jumping an eye-popping 16.3 percent year over year in September.