Moody’s downgrades of our credit ratings means your money

Moody’s decision to downgrade your US credit rating could affect your money, experts say.

Debt downgrades quickly put pressure on bond prices, bringing higher yields on Monday morning. The US bond yield in 30 years exceeded 5%, and the 10 years exceeded 4.5%, reaching a significant level at a time when the economy was already showing signs of tension from President Donald Trump’s tariff policy rolling out. Bond prices and yields move in the opposite way.

Treasury bonds affect the fees of a wide range of consumer loans, including 30-year fixed mortgages, and also affect products such as car loans and credit cards.

“It’s really hard to avoid a consumer impact,” said Brian Leiling, head of global bond strategy at Wells Fargo Investment Institute.

The major credit rating agencies reduced the US sovereign credit rating to AA1 on Friday from the highest possible AAA.

In doing so, he cited the increasing burden of the federal government’s fiscal deficit. Republicans’ attempts to make President Donald Trump’s 2017 tax cuts permanent have threatened to increase federal debt by trillions as part of a settlement package.

“As our credit rating drops, we expect to see an increase in borrowing costs,” said Ivory Johnson, certified financial planner at Delanti Wealth Management in Washington, DC.

“If a country represents a greater credit risk, creditors require that creditors be compensated at a higher interest rate,” said Johnson, a member of CNBC’s Financial Advisor Council.

Americans struggling to keep up with the sins of empty interest amid Moody’s downgrade are unlikely to receive great relief any time soon.

“The economic uncertainty, particularly regarding tariff policy, has put the Fed and many companies on hold,” said Ted Rothman, senior industry analyst at Bankrate.

President Rafael Bostic, the federal president of Atlanta, said on Monday on CNBC’s “Scoebox” that he has only seen one rate cut this year as the central bank tries to balance inflation pressures and recession worries. Federal Reserve Chairman Jerome Powell recently said tariffs could slow growth and drive inflation, making it difficult to lower the Fed’s benchmark as previously expected.

Another CFP and president of New York’s Bone Fide Wealth, Douglas Boneparth, agreed that downgrades could lead to higher interest rates on consumer loans.

“Downgrades can increase borrowing costs over time,” said Boneparth, who also has CNBC’s FA Council.

“Think about higher fees for mortgages, credit cards and personal loans, especially if your trust in US credit is even more weakened,” he said.

Some loans may see a more direct impact as their fees are tied to bond prices.

As mortgage rates are largely linked to Treasury yields and the economy, “30-year mortgages are the most closely correlated, and the long-term rates are already high,” Rehling said.

According to Mortgage News Daily, the average rate for a 30-year fixed-rate mortgage was 6.92% as of May 16, while the fixed-rate rate for 2015 was 6.26%.

Credit cards and car loan rates track federal fund fees more directly, but the country’s financial challenges play a key role in the Federal Reserve’s attitude towards interest rates. “The Fed’s funding rate is higher than if the US had a better fiscal situation,” Rehling said.

Since December 2024, overnight lending rates have ranged from 4.25% to 4.5%. As a result, Rothman said the average credit card rate is currently 20.12%, a slight drop from the record 20.79% set last summer.

Credit card fees tend to reflect the Fed’s actions, so they will keep “longer” higher credit card rates at around 20% for the rest of the year, Rothman said.

Before the downgrade, Moody’s was the last of the leading credit rating agencies that placed the US at the highest possible rating.

Standard & Poor’s downgraded the country’s credit rating in August 2011, and Fitch Ratings reduced it in August 2023.

Still, the move highlights the country’s financial challenges, saying, “The United States still maintains control as a safe shelter economy for the world, but it has some cincs in its armor.”