Mortgage Pros Warn Credit Card Rate Cap Could Backfire On Homebuyers

In the mortgage industry, the initial reaction to President Donald Trump’s proposal to cap credit card interest rates at 10% has been concern that the policy could ultimately backfire on would-be homebuyers.

The cap might seem beneficial on paper, but the long-term consequences, including reduced credit availability, could outweigh the benefits, mortgage professionals told HousingWire. 

Speaking at the World Economic Forum in Davos, Switzerland, on Wednesday, Trump said that rising credit card debt has become one of the biggest barriers to saving for a down payment on a home. According to him, profit margins for credit card companies now exceed 50%, while interest rates charged to consumers often range from “28%, 30%, 31%, 32%.”

“I’m asking Congress to cap credit card interest rates at 10% for one year, and this will help millions of Americans save for a home,” Trump said. “They have no idea they’re paying 28%. They go out there a little late in their payment, and they end up losing their house.” 

The logic behind the proposal is straightforward: Lower interest rates would reduce monthly payments, freeing up cash for savings or allowing borrowers to pay down outstanding balances faster. But industry participants caution that the response by credit card companies could undermine these gains.

“In theory, it sounds great because running those rates down to 10% would naturally lower the payments that are due on those credit cards,” said Todd Bitter, national sales director at NEXA Lending. “My concern is that this is going to cause the credit card companies to tighten credit severely.”

That tightening could take the form of reduced credit limits, which would drive up borrowers’ credit utilization ratios and potentially drag down credit scores — hurting their mortgage eligibility in the process. 

Similar pullbacks in credit limits happened during the 2008–09 housing crisis and again during the COVID-19 pandemic, according to Bitter. “Even though it (the cap) looks good on paper, I fear the repercussions,” he added.  

Banks could also respond by denying credit cards to borrowers who would otherwise qualify, given the lower return relative to risk. That could make it harder for consumers to build credit histories and eventually access the mortgage market, sources said. 

New Jersey-based mortgage broker Joe Racamato, president of Silex Financial Group Inc., said the proposal could produce “mixed results.” 

“If you have $10,000 on a credit card and you are paying 10% interest versus 20%, then your minimum monthly payment that shows up on the credit report is going to be lower and that will help the debt-to-income ratio,” Racamato said. “But my hunch is that you would see more stringent underwriting when it comes to getting credit cards from the banks.” 

He added that banks could reduce available credit lines, raising the average credit score of approved cardholders while leaving underserved borrowers with even fewer options.

Racamato gave an example: If you have a $10,000 limit and a $5,000 balance, and the bank cuts that limit to $5,000, your utilization jumps immediately — and that can significantly hurt your credit score. 

The American Bankers Association (ABA) has pushed back strongly against the proposal. On Tuesday, the group released data estimating that a 10% cap could result in 74% to 85% of open credit card accounts being closed or having their credit lines sharply reduced. That includes between 71% and 84% of borrowers with VantageScore credit scores above 600.

Based on roughly 75% of the credit card market, the ABA estimates that at least 137 million cardholders — and potentially as many as 159 million — would lose access to their cards.

In Congress, Sens. Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) introduced the 10 Percent Credit Card Interest Rate Cap Act (S.381) in February 2025, which would cap credit card interest rates at 10% beginning in 2031.