The cost of money itself is on the ballot as voters struggle with pricey car loans, mortgages and credit-card debt

Andrew Keshner and Aarthi Swaminathan

Interest rates aren't expected to decline anytime soon, as the Federal Reserve holds steady on Wednesday

Borrowing costs remain high.

Americans are going to the polls as they pay higher gasoline prices and rack up bigger grocery bills - and as stubbornly high borrowing costs compound their affordability challenges.

In an election season that has centered on costs, the cost of money itself has been another example of the mounting financial pressure on voters.

Mortgage rates, credit-card APRs and car loan rates all track a similar trajectory. After soaring several years ago, they haven't dropped by much.

Recently, rising bond yields have made consumer loans for major purchases more expensive. The Federal Reserve's September rate hike, the first in three years, is poised to make it more costly to carry a balance on the credit cards that many Americans are now using for their everyday expenses.

The Fed held its benchmark interest rate steady on Wednesday. Central bank officials are penciling in one more rate increase this year and no increases for 2027 - but no decreases, either.

The weight of high interest rates on Americans' financial outlooks showed up in consumer sentiment data from the University of Michigan last week. Eight in 10 consumers said October was a bad time to buy a house. Nearly two-thirds, 62%, pointed to high interest rates. That's up from 47% a month ago.

"This October was the first time in a while that interest rates meaningfully overtook high prices" as the dominant reason people said it was a bad time to buy a house, said Joanne Hsu, the school's director of surveys of consumers.

Consumer mood has been hovering just above a record low since May, Hsu said in an interview with MarketWatch, and while people are keenly aware of higher interest rates, prices and inflation remain the top concerns.

Borrowing costs took off during the Biden administration as inflation hit a four-decade high. During the 2024 presidential campaign, Donald Trump said he would fight inflation and get mortgage rates to 3%. The midterms give voters a chance to pass judgment on that effort so far.

Before Trump's first term in office ended in January 2021, mortgage rates were well under 3%, a "historic low," White House spokesman Matthew Middleton said in a statement. The 30-year fixed-rate mortgage averaged 2.65% in the first week of 2021, Freddie Mac (FMCC) data show.

"Joe Biden and Democrats then spent the next year fueling the worst inflation crisis in a generation forcing the Federal Reserve to raise interest rates nearly a dozen times, driving mortgage costs and credit card fees higher," Middleton said.

The Trump administration "will continue to pursue executive orders and deregulation aimed at expanding housing supply, lowering costs, and improving affordability," he said.

Higher oil, gas and diesel prices from the U.S.-Iran standoff have juiced inflation rates. The midterm elections also come at a time when the national debt stands at $40 trillion. Nearly nine in 10 voters - 88% - say they worry the national debt is adding to their own borrowing costs, according to a running poll commissioned by the Peter G. Peterson Foundation.

These numbers have been consistently high in polling going back to February, said Brett Loper, executive vice president for policy at the foundation, which is focused on the United States' long-term fiscal health.

In recent years, voters have increasingly made the connection between the national debt and their own borrowing costs, he said. "If it costs more for the U.S. government to borrow, it's going to cost more for me to borrow," Loper told MarketWatch.

Here's a look at how borrowing costs have ramped up pressure on consumers.

Stubbornly high mortgage rates

Voters are frustrated by the high cost of housing. About 74% of Americans say the U.S. is facing a housing crisis, according to a survey by Clever Real Estate, a broker. Within that group, 63% reported feeling angry about housing costs.

Much of the frustration stems from high mortgage costs. The 30-year fixed-rate mortgage is up 107 basis points from a year ago, averaging 7.37% as of Oct. 23, according to the Mortgage Bankers Association on Wednesday.

Buyers spooked by the higher borrowing costs are putting their purchase plans on hold: The number of mortgage applications to purchase homes was 18% lower at the end of October compared with the same week a year ago, the industry group said.

High home prices - on top of borrowing costs - are also making it hard for people to afford homes. Even though fewer people are buying and selling homes, prices are still increasing.

With a 30-year mortgage rate of 7%, a buyer looking at a typical $425,000 home with a 20% down payment would pay about $2,900 per month in principal, interest, property tax and insurance payments, according to Bankrate's mortgage calculator.

At a 6% mortgage rate, that same monthly payment falls to just under $2,700 a month. That's a meaningful difference over the lifespan of a 30-year mortgage.

Credit-card APRs are creeping upward

Banks use the Fed's short-term benchmark rate to help set credit-card APRs. As a result, the annual percentage rates on credit cards have been elevated for more than three years at around 20%.

Earlier this year, Trump called for a temporary 10% cap on credit-card APRs. The idea, which was met with fierce opposition from banks, hasn't materialized. Asked about the status of the proposed cap, a White House official said the administration is continuing to work with lawmakers "to deliver on the president's agenda to lower costs for American consumers."

The latest Fed rate hike is already pushing up APRs on many new card offers, said Matt Schulz, chief consumer finance analyst at LendingTree (TREE). The national average APR on new cards climbed to 23.96% in October, marking a third consecutive month of increases, he said.

APRs could keep climbing even after the September Fed hike has trickled into rates, Schulz said.

"The Fed might raise rates in December, but even if they don't, I still expect issuers to slowly increase rates over the next six months or so," Schulz told MarketWatch.

Car loans are more expensive

Compared with 2019, the interest a driver pays over the life of a typical loan is nearly 80% higher for a new vehicle, said Jeremy Robb, chief economist at Cox Automotive, and nearly 100% higher for a used vehicle. "For the auto market, the cost of money has already become a major constraint," he said.

Many car buyers have been taking out longer-term loans to make their monthly payments more affordable, as car prices have accelerated since the pandemic.

When asked about the financial conditions for buying a car, University of Michigan researchers found that 24% of consumers cited interest-rate concerns. That was up from 18% a month ago.

That's understandable, seeing where car loan rates are going.

In September, the interest rate on a new car loan averaged 10.17% for a driver with a prime credit score, according to Dealertrack. That was a high point in more than 10 years of data. The rate on a used car averaged 14.34%.

Those rates can be lower for buyers with sterling credit history. Experian (EXPGY) data shows the average second-quarter loan was 6.35% for new cars and 11.19% for used cars. Buyers with "super prime" scores of at least 781 accounted for nearly half of loans in the quarter.

The average monthly payment was $765 for a new car and $542 for a used car, Experian data showed. Both are up from two years ago.

A Fed rate pause Wednesday likely won't help drivers much, Robb said. Auto loan rates have been pointing higher this month, "largely because of higher bond yields and general market uncertainty."

See also: Young Americans are giving up on car ownership. It's a path to financial freedom for some.

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-Andrew Keshner -Aarthi Swaminathan

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10-28-26 1612ET