What The Federal Rate Cut Means To You.

2007-09-30T09:30:00.000-04:00

The Federal Reserve cut rates almost two weeks ago for the first time since 2003, but how does this help the consumer?
This is lowering the short term interest rate which in turn will cause banks to lower their prime rate, usually within a few hours or days. This directly effects most car loans, credit cards, student loans, home -equity lines of credit, and home equity loans (aka second mortgages). The one type of loan this does not directly effect is the fixed rate mortgages many people use to purchase homes. These loans are typically tied to the 10 year treasury bound which fluctuates based on economic outlooks and/or inflation. What this means is even if the Fed lowers short term rates fixed mortgage rates can go up or down, and with this cut they did take a modest up tick.

Arm's, Adjustable Rate Mortgages, are influenced by either Treasury averages or Libor depending on the loan and bank; Therefore, many of these loans will lower by their next adjustments as early as October. These are the basic principles that cover the majority of consumer loans but in no way encompass all loans products available.

Northern Virginia's Premier Real Estate Blog

What The Federal Rate Cut Means To You.