A quarter of a percentage point does not move through a mortgage, a card balance and a savings account the same way. A mortgage on a fixed rate does not move at all until it comes up for renewal or the reader remortgages; a mortgage already tracking the base rate moves within a payment cycle or two. A credit card, priced off a variable annual rate, usually moves faster than a mortgage does, because the card issuer is not locked into a fixed term. A savings balance depends entirely on whether the account tracks the base rate explicitly or the bank simply chooses whether to pass a move on, which it is not obliged to do at any particular speed.

Why the size of the move understates what happens next

The 25 basis points itself is arithmetic anyone can do: multiply the balance by 0.0025 and divide by twelve for a rough monthly figure. What that arithmetic cannot tell you is whether the full 25 basis points actually reaches the payment, and on that point the record across mortgages, cards and savings accounts is consistent: it usually does not, and the gap between the policy move and the change a household actually sees is where most of the confusion about rate decisions comes from.

Where the mortgage differs from the other two

A fixed-rate mortgage is a contract for a term, so a policy change during that term changes nothing about the payment until the term ends. A tracker or variable mortgage is written to follow the base rate, or a close relation of it, by an agreed margin, so the mechanism there is closer to automatic. Cards and savings accounts sit in between: contractually variable, but with no fixed schedule for when or by how much the rate charged or paid actually changes.

A move of a quarter of a percentage point (what the trade calls 25 basis points) is a fixed number once it is applied to a balance. The workings below show it against three round figures: a $300,000 mortgage balance, a $10,000 card balance, and a $50,000 savings balance. Each one assumes, for the sake of the arithmetic, that the whole quarter point reaches the balance unchanged. Whether it actually does is a separate question, and the next section works through what the published record shows on that point.

These are worked examples for information only, not a forecast of what will happen to any particular loan, card or account.

The mortgage balance: $300,000

This calculation only applies where the mortgage rate is tied to a benchmark that moves with the Federal Reserve's target range, such as many adjustable-rate mortgages and home equity lines of credit. A fixed-rate mortgage does not reprice at all until it resets or is refinanced, whatever the Federal Open Market Committee decides.

• Balance: $300,000
• Rate change: 0.25 percentage points
• Extra interest per year: $300,000 × 0.0025 = $750
• Extra interest per month: $750 ÷ 12 = $62.50

That $62.50 a month sits on top of whatever the loan already costs. It does not shrink or grow the loan itself; it is simply what the higher rate adds to the interest bill each month, before any change to the payment schedule.

The card balance: $10,000

The same arithmetic applies to a revolving balance, though a card usually compounds interest daily, so a statement will not show this figure in isolation.

• Balance: $10,000
• Rate change: 0.25 percentage points
• Extra interest per year: $10,000 × 0.0025 = $25
• Extra interest per month: $25 ÷ 12 ≈ $2.08

Twenty-five dollars a year on a $10,000 balance is what the rate change itself adds. The compounding that a card applies daily will change the figure that actually appears, but it does not change the size of the underlying move.

The savings balance: $50,000

A saver earning interest on $50,000 sees the same sum run the other way, on the assumption that the deposit rate moves by the same quarter point as the target range.

• Balance: $50,000
• Rate change: 0.25 percentage points
• Extra interest per year: $50,000 × 0.0025 = $125
• Extra interest per month: $125 ÷ 12 ≈ $10.42

Whether a bank actually passes on the full quarter point to a savings account is a question the historical record answers. The glossary entry for a basis point sets out how the unit itself is used across these three examples.

When the Federal Open Market Committee moves the federal funds target range, the change does not travel through the economy at a fixed rate. Mortgage rates, credit card rates, and savings rates each answer to it in their own way, and the published record shows the answer is usually smaller than the move itself.

Why the move gets absorbed along the way

A quarter-point change reaches a household through a chain of intermediaries: a bank funds itself in wholesale markets, sets its own lending and deposit rates against its own costs and competitive position, and only some of that chain moves in lockstep with the Fed's target range. A fixed-rate mortgage already issued does not move at all, because the rate was set at origination and stays there for the life of the loan. A card rate tied to a prime rate tends to move close to one-for-one, but only for balances carrying a variable rate, and issuers vary in how quickly they apply the change. Savings rates are the least predictable of the three, because a bank sets what it pays depositors partly on how much it wants their deposits at all.

What this means for reading any single decision

A rate decision is a change to one specific rate, administered by the central bank itself, and the size of that change is exact. What happens next, to any one household's mortgage, card, or savings balance, depends on the terms of that particular product and how its provider chooses to respond, which is a separate question from what the Committee decided. The gap between the two is the reason the arithmetic of a rate move and the pass-through it actually produces are worth checking separately.

Checking it against the published series

Retail rate series for mortgages, cards, and deposits are published alongside the federal funds target range itself, which is what makes it possible to line the two up over time. The mechanism guide on how to read a central bank's own words covers where the target range itself is announced and how to track it release by release.

Where each series is published

The federal funds target range itself is set by the Federal Open Market Committee and written down, with its effective date, in the implementation note released alongside each policy statement. The guide to reading a central bank's own documents explains where that note sits in the published record and how to find the date a change actually took effect.

The retail rates on the other side of the comparison come from separate series, not from the Fed itself. Mortgage rates are tracked through Freddie Mac's Primary Mortgage Market Survey, credit card rates through the Federal Reserve's own survey of card plan terms, and deposit and savings rates through weekly bank rate surveys. All three are commonly retrieved through FRED, the data service run by the Federal Reserve Bank of St. Louis. This page uses the FRED® API but is not endorsed or certified by the Federal Reserve Bank of St. Louis.

How to check the pass-through on your own dates

Pass-through is just a comparison of two changes over the same window, so checking it does not require anything beyond the series above and a calendar.

1. Find the date the FOMC changed the target range, from the implementation note for that meeting.
2. Read the level of the retail series (mortgage, card, or savings rate) on the closest available date before that change.
3. Read the level of the same series a chosen number of weeks or months afterwards.
4. Compare the size of the retail move to the size of the target range move.

Doing this across a few different episodes is the only way to see whether a particular retail rate tends to move quickly, slowly, or only partially. Unfamiliar terms along the way, such as the federal funds target range itself, are covered in the glossary.