{"id":23262,"date":"2026-02-13T18:43:17","date_gmt":"2026-02-13T18:43:17","guid":{"rendered":"https:\/\/incredipros.com\/?p=23262"},"modified":"2026-02-13T18:43:19","modified_gmt":"2026-02-13T18:43:19","slug":"affordability-is-a-big-problem-lower-rates-wont-solve-it","status":"publish","type":"post","link":"https:\/\/incredipros.com\/?p=23262","title":{"rendered":"Affordability Is A Big Problem. Lower Rates Won\u2019t Solve It"},"content":{"rendered":"
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The President\u2019s proposal to cap credit card rates at a maximum of 10% over the next year has gotten a lot of attention in the midst of a national affordability crisis. It\u2019s understandable. Rates are flashy, and it sounds good to talk about bringing them down.\u00a0<\/p>\n

But I\u2019d argue they aren\u2019t what\u2019s making things feel unaffordable, whether we\u2019re talking about credit cards, mortgages or auto loans. They factor in, of course, but they\u2019re hardly the biggest problem.<\/p>\n

And, at least in the case of credit cards, a rate cap could lead to a bigger economic problem by a significant decline in access to credit for people with lower credit scores \u2014 a gut punch to many of the people this proposal is seemingly aimed at helping. (Additionally, though less importantly, it could substantially cut into credit card rewards programs, but that\u2019s another discussion).<\/p>\n

So what is causing the affordability issues if not rates? Why are people having trouble affording things we\u2019re used to using credit for \u2014 that is, homes, cars and credit cards \u2014 and what can actually be done to address it? Let\u2019s take a look.<\/p>\n

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@bankrate <\/p>\n

Affordability is a real problem and lower interest rates alone won\u2019t fix it.<\/p>\n

\u266c original sound \u2013 Bankrate <\/section>\n<\/blockquote>\n

Have a question about credit cards? E-mail me at <\/em>ted.rossman@bankrate.com<\/em> and I\u2019d be happy to help.<\/em><\/p>\n

Rates aren\u2019t the only thing making homes unaffordable<\/h2>\n

Let\u2019s start with arguably the biggest rate misconception of all \u2014 mortgage rates. The median home price rose from $274,900 in Q4 2019 to $414,900 in Q4 2025, according to the National Association of Realtors. That has affected affordability much more than the rise in mortgage rates (the average 30-year fixed rate increased from 3.90% at the end of 2019 to 6.16% today).<\/p>\n

If we apply those rates on top of the median home prices in question and assume a 20% down payment, we get monthly principal and interest payments of $1,037 at 3.90% and $1,341 at 6.16% if the home costs $274,900. With a median home price of $414,900, those monthly payments go to $1,566 at 3.90% and $2,024 at 6.16%.\u00a0<\/p>\n

\n Higher prices are impacting affordability significantly more than higher rates.\n<\/p>\n

If you\u2019re in the market to buy a home, you certainly welcome lower prices and lower rates (although if you\u2019re also selling a home, you want to get the best possible price on that). But higher prices are impacting affordability much more than rates. Realtor.com estimates that one of two things would need to happen for monthly mortgage payments to fall back to 2019 levels: Household incomes would need to rise 56% or mortgage rates would need to fall to 2.65%. In other words, it\u2019s not happening anytime soon.<\/p>\n

Bankrate\u2019s 2025 Wage to Inflation Index revealed that prices rose 22.7% since the start of 2021 while wages were up a cumulative 21.5%. This is why many households feel like they\u2019re falling behind, even if they\u2019re making more money.<\/p>\n

What you can do: <\/strong>If you\u2019re in the market for a home, focus on the things you can control.\u00a0<\/p>\n

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  1. \nSave for your down payment.<\/strong> The more you can put down, the less you have to borrow and the lower your monthly payments.<\/li>\n
  2. \nConsider your priorities<\/strong>. Can you live further from the city and save a little money? Do you need a fourth bedroom or will three do for now? Understand clearly your \u201cwants\u201d and \u201cneeds\u201d and be ready to compromise.<\/li>\n
  3. \nShop around for your mortgage. <\/strong>Don\u2019t just go to your primary bank or get a loan from the credit union your real estate agent recommends. Do the legwork to search for the best mortgage rate you can qualify for. Lower rates aren\u2019t going to fix everything, but it never hurts to get one as low as possible.<\/li>\n<\/ol>\n

    Credit card rates are high, but a cap won\u2019t fix your debt<\/h2>\n

    Now, let\u2019s take a look at credit card rates and the reality of that proposed rate cap. The average credit card rate is 19.6%. Riskier borrowers often face rates upwards of 25%, sometimes even 30%, as lenders set rates that allow them to manage their risk with those cardholders. Credit cards represent unsecured debt, so the card issuer doesn\u2019t have as many options to pursue nonpayment as they would if there were an asset to repossess.<\/p>\n

    Because of that, capping rates could lead to a catastrophic decline in access to credit for those riskier borrowers. The Electronic Payments Coalition warns that if a 10% rate cap were to be implemented, \u201cNearly every credit card account associated with a credit score below 740 would be closed or severely restricted.\u201d FICO reported in September 2025 that the average credit score in the U.S. was 715, meaning millions of people fall below that 740 threshold.<\/p>\n

    Without access to credit cards, those people could be pushed to far more expensive alternatives like payday loans and pawn shops, which can charge annual percentage rates in excess of 200, 300, even 400%. Not so good for affordability, right?<\/p>\n

    Importantly, history tells us that credit card rates, even though they\u2019re high, aren\u2019t the root of the problem.<\/p>\n

    The average credit card rate was around 10% as recently as the late 2000s and early 2010s. Surprisingly, Americans\u2019 household debt-to-income ratio wasn\u2019t much different than it is today. It was actually a little bit higher back then. Lower rates aren\u2019t a distant memory, but they weren\u2019t a cure-all, either.<\/p>\n

    What you can do: <\/strong>Don\u2019t get me wrong \u2014 I don\u2019t want you to pay high credit card rates. There are plenty of things you can do today, without waiting for the government to cap credit card rates at 10% (which probably won\u2019t happen and would come with major side effects if it does pass through Congress).<\/p>\n

    There are already ways to bring your personal credit card rate down, including: <\/p>\n

      \n
    • Paying in full each month (something that just over half of cardholders do in a typical month).<\/li>\n
    • Signing up for a card with a generous 0% APR intro period before you have to make a big purchase that will take you several months to pay off.<\/li>\n
    • Applying for a 0% balance transfer card if you already have debt and want time to pay it off interest-free (some of these promotions last as long as 24 months).<\/li>\n
    • Seeking out assistance from a credible nonprofit credit counseling agency that may be able to help you negotiate lower rates as you work to pay down your debt. <\/li>\n<\/ul>\n

      Auto loan rates aren\u2019t the biggest problem, either<\/h2>\n

      Lastly, let\u2019s look at car affordability. The car affordability problem is grounded in the average new vehicle cost sitting around $50,000. Auto loan rates have risen in recent years, sure, but the price of the car is a much bigger obstacle (not to mention record costs for car insurance, maintenance and repairs).<\/p>\n

      At present, the average 60-month new car loan rate is 7.01%, Bankrate reports. If we take a 20% down payment off the average new car price, you\u2019re looking at borrowing about $40,000. Over five years, that\u2019s a monthly payment of $792.<\/p>\n

      Compare that with the average rate at the end of 2019 (4.61%). If rates were to fall back to that level (which isn\u2019t likely any time soon), the monthly payment would be $748. Again, not to sneeze at an extra $44 per month, but rates aren\u2019t the biggest culprit here, either.<\/p>\n

      At the end of 2019, the average new car cost $38,948, according to Kelley Blue Book. At that price, assuming a 20% down payment, the monthly payment would be $582 at 4.61% and $617 at 7.01%. Once again, higher prices are squeezing consumers much more than higher rates.<\/p>\n

      The bottom line<\/h2>\n

      There are no easy answers here. The White House has unveiled a slew of affordability-oriented proposals in recent months, but many of these supposed cures could be even worse than the economic maladies they\u2019re supposed to treat. A 10% credit card rate cap could cause you to lose access to credit. A 50-year mortgage could keep you in debt for the rest of your life while building equity at a snail\u2019s pace and owing tremendous sums of interest.<\/p>\n

      Rather than government intervention, the best approach is to focus on the fundamentals. Managing your personal finances isn\u2019t easy, but it doesn\u2019t need to be complicated, either. The golden rules are things like living on less than you make, avoiding high-cost debt and building an emergency savings cushion and shopping around for your financial products. Don\u2019t be afraid to ask for assistance, either. Whether it\u2019s enlisting support from family and friends, getting advice from a reputable nonprofit credit counseling agency such as Money Management International or perusing our Bankrate resources, there\u2019s always someone available to help.<\/p>\n

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