Recent Trends in Average Interest Rates on Consumer Debt

Consumer Debt

An increase in interest debts rate can affect consumer spending and the retail sector. Rates are meant to be range-bound. Well at least those the Fed can control. With the 2020 COVID-19 pandemic that affected the world’s economy, chances are 2021 might seem stable with a low-interest rate on consumer debts

The federal reserve has given assurances not to raise interest rates through 2023 to aid the recovery of the economy. Plus, there needs to be a rise in public confidence in the economy before interest rates can be increased. 

More so, with the substantial inflation risks of the economy still in view, interest rates are very unlikely to increase in the years to come. However, there are a few trends in the average interest rates that consumers need to take note of. 

Trends that affect the mortgage rates, credit card rates, home equity rates, and the likes following bank rates predictions.

#1. Mortgage Rates

Since the pandemic occurred in 2020, mortgage rates have been in consistent decline. The trend in decline helped underwrite the “strong” housing market resulting in an upsurge in the demand for more homes as they became even more affordable.

So much so that mortgage lenders couldn’t keep up with the surge. The average cost of a 30-year fixed-rate mortgage is at an all-time low, making it easier for low-income earners to gain access to mortgage loans.

While the Fed intends to keep an eye on mortgage rates on a regular basis, now is a good time to take advantage of the low rate if you need to.

#2. Credit Card Rates

The change in credit card rates has not mirrored the decline in underlying rates. As such, credit cards break differently from several other financial products as banks and lending institutions continue to keep rates high to increase their profitability.

With some rates increasing while others decrease. Ideally, credit card rates should average 16.15% by the end of 2020 (which by the way is below where it started in 2020). However, existing cardholders will not have to bother about any change in their interest rates. 

Additionally, as lending restrictions rise, many consumers are finding themselves cut off from available credit on existing cards.  This also often leads to increased rates on existing cards for failure to maintain available credit ratios.

This is occurring despite the Federal Reserve’s intention to create benchmark interest rates at current levels all through 2021 and beyond. Nonetheless, the average credit card interest rates may increase despite the banks’ static cost of funds so as to create even higher bank profit margins.

#3. Home Equity Rates

Homeowners with previous home equity do not need to bother about rates increasing with the federal reserve as home equity rates may fall as 2021 goes on. The average rate available for new borrowers will likely continue to be lower through the end of 2021.


The lowering trends in average interest rates is unlikely to be passed on to existing or new consumers except in the form of initial “teaser” rates to encourage new clients to obtain new cards.