Definition of a Decrease in the Interest Rate

Interest rates are subject to change because of investor expectation about future economic conditions.

While some interest rates are fixed, interest rates in general tend to fluctuate depending on the economy's general behavior. This means that interest rates are subject to both increase and decrease, depending on the situation at the time.

Interbank Decrease

The Federal Reserve, the government's central bank, attempts to manage inflation and keep the economy growing by buying or selling securities bonds. When it is selling them, there is more money available in the system as a whole, which means that interest rates on interbank loans will decrease.

Mortgage Decrease

Interest rates on on adjustable mortgages are tied to specific indexes, like the prime rate or the rate at which Treasury bonds are yielding interest or the rate on certificates of deposit. This varies depending on the bank, but if this rate decreases then the interest rate on the mortgage will also decrease.

Savings Account Decrease

Savings account interest rates can decrease as well. They are also tied to the Federal Reserve: When the Fed lowers the federal funds rate, the interbank loan interest rate, then banks have more money available and do not have to offer as high of an incentive to people to deposit money in savings accounts or certificates of deposit. Thus, interest rates on savings accounts can decrease.

References

• Investopedia: Federal Reserve: Monetary Policy
• Investopedia: Adjustment Index
• Investopedia: Savings Account