For the first time in history the Federal Reserve has cut the Fed Funds Rate below 1%. In it's most recent attempt to stimulate our economy, the Federal Reserve has cut its key interest rate to a range of between o% and .25%, and expects the rate to stay that way for a while.
What is the federal funds rate? The federal funds rate is the overnight lending rate used to set rates for different loans, such as credit cards, home equity lines of credit, adjustable rate mortgages, and business lines and loans. This does not effect conventional mortgage rates, which is a misconception with most people. Although, the bond market soared after the news and this will cause the mortgage to change.
The Federal Reserve uses this rate as a tool to grow or slow the economy. Lower rates generally encourage spending by making borrowing more attractive to consumers. Higher rates generally slow spending and the economy and people being to save more.
It hasn't been clear where banks would set their prime rate at. Usually, the prime rate is 3% higher than the fed funds rate. Many banks, including Bank of America, have announced they were lowering the prime lending rate to 3.25%.
The last time this happened our real estate market boomed. But rates haven't ever been this low before and loan programs have changed dramatically. It is going to be very interesting to see what happens next.
[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]
We Also Suggest:
- Bank of America's Balance Liquidation Program (BLP) Still Sucks
- What's the Best Way to Pay off My Credit Card Debt If I Have a High FICO Credit Score ?
- How did This Economic Crisis Start?
- Should I Use My 401K to Pay Off My Mortgage?
- Should I Take Out a 401K Loan to Pay Off My Credit Cards?
- Follow my journey to pay off debt and subscribe by email.
- Subscribe in a Reader (RSS)
- Follow us on Twitter
- Follow us on Blogger
No comments:
Post a Comment