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How would lowering interest rates affect average Americans?

Posted at 3:12 PM, Nov 12, 2019
and last updated 2019-11-12 16:12:54-05

There has been talk around the country lately of a recession and what to do to prevent it from happening.

President Donald Trump has pushed the idea of significantly lowering interest rates.

So, what would that mean for the average American?

"What it does is it shifts the economic balance of power towards borrowers and away from lenders,” said Miles Kimball, Professor of Economics at the University of Colorado Boulder. “And guess what, people who borrow money are people who are more eager to spend than lenders."

This could make getting a loan easier and more affordable.

Kimball says if interest rates drop, it encourages people to spend money they've been saving rather than leave it in the bank.

"All of a sudden you think about a zero percent loan, obviously the economic benefit is huge there," said a new home buyer, Todd.

Zillow says the average price of a home is $231,000. With a 3.8% interest rate, a payment would be $1,144, but even if the rate dropped to just 1%, it would be $878.

Although that sounds amazing, banks would have to charge fees because they would be handing out more money than depositors are putting in.