Affordability Is A Big Problem. Lower Rates Won’t Solve It

The President’s 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’s understandable. Rates are flashy, and it sounds good to talk about bringing them down. 

But I’d argue they aren’t what’s making things feel unaffordable, whether we’re talking about credit cards, mortgages or auto loans. They factor in, of course, but they’re hardly the biggest problem.

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 — 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’s another discussion).

So what is causing the affordability issues if not rates? Why are people having trouble affording things we’re used to using credit for — that is, homes, cars and credit cards — and what can actually be done to address it? Let’s take a look.

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Affordability is a real problem and lower interest rates alone won’t fix it.

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Have a question about credit cards? E-mail me at ted.rossman@bankrate.com and I’d be happy to help.

Rates aren’t the only thing making homes unaffordable

Let’s start with arguably the biggest rate misconception of all — 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).

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%. 

Higher prices are impacting affordability significantly more than higher rates.

If you’re in the market to buy a home, you certainly welcome lower prices and lower rates (although if you’re 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’s not happening anytime soon.

Bankrate’s 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’re falling behind, even if they’re making more money.

What you can do: If you’re in the market for a home, focus on the things you can control. 

1. Save for your down payment. The more you can put down, the less you have to borrow and the lower your monthly payments.
2. Consider your priorities. 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 “wants” and “needs” and be ready to compromise.
3. Shop around for your mortgage. Don’t 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’t going to fix everything, but it never hurts to get one as low as possible.

Credit card rates are high, but a cap won’t fix your debt

Now, let’s 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’t have as many options to pursue nonpayment as they would if there were an asset to repossess.

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, “Nearly every credit card account associated with a credit score below 740 would be closed or severely restricted.” 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.

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?

Importantly, history tells us that credit card rates, even though they’re high, aren’t the root of the problem.

The average credit card rate was around 10% as recently as the late 2000s and early 2010s. Surprisingly, Americans’ household debt-to-income ratio wasn’t much different than it is today. It was actually a little bit higher back then. Lower rates aren’t a distant memory, but they weren’t a cure-all, either.

What you can do: Don’t get me wrong — I don’t 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’t happen and would come with major side effects if it does pass through Congress).

There are already ways to bring your personal credit card rate down, including:

• Paying in full each month (something that just over half of cardholders do in a typical month).
• 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.
• 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).
• 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.

Auto loan rates aren’t the biggest problem, either

Lastly, let’s 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).

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’re looking at borrowing about $40,000. Over five years, that’s a monthly payment of $792.

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

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.

The bottom line

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’re 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’s pace and owing tremendous sums of interest.

Rather than government intervention, the best approach is to focus on the fundamentals. Managing your personal finances isn’t easy, but it doesn’t 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’t be afraid to ask for assistance, either. Whether it’s 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’s always someone available to help.