The Latest Fed Rate Cut
I mentioned earlier this week, that the Fed might cut it’s benchmark interest rate. They did just that yesterday, by another 50 points. This brings the rate down to 3%. So what does this mean for consumers.
The prime rate is now at 6% (Fed rate + 3%). This means that HELOCs with prime minus 1 are at 5%, producing quite a bit of savings for those locked in to these loans. If the Fed rate is maintained or lowered again, then mortgages and home equity loans will see a dip as well, fueling more refinances in the short term.
On the flip side, you have to wonder about those retires who use CDs and MMAs for their primary investment vehicle. The rates on these are going to get clobbered and there income will suffer. Also, since this group does not have earned income, they will not be able to take advantage of the ensuing tax rebates. This is a large percentage of our population and I ponder the effect that their decrease of spending dollars will have on the economy. I am sure Mr. Bernanke’s group must take this group into consideration.
Filed under: Finance and Investing
