Credit And Interest Rate Cuts – What Can You Do For Me?

Posted by admin under: Main Feb 05

If you are a home owner with an excellent 30-year fixed interest rate, it’s a high probability you will not see a change that will support a reduction in your monthly mortgage. This is due to the fact that mortgage interest rates are not tied to the Federal funds rate. So, if you are sitting on a 5.25% 30-year fixed interest rate, you are already sitting pretty.

While you wait for something more appetizing, keep your eye on the Treasury note yields and the London Interbank Offered Rate (LIPOR) which is what the 30-year fixed mortgage rate is linked to. These two rates are influenced by the Federal funds rate cuts but don’t hold your breath that they will be influenced in your favor at every tease.

If you are an adjustable rate mortgage (ARM) holder and are due for an annual adjustment, you may benefit from the Fed fund cut. Here too, the Treasury bills and the LIPOR influence the ARM rates. You should consider refinancing to a 30-year fixed mortgage. And don’t be moved by every rate cut tease or try to wait it out for the lowest rate cut. Your time might be running out as every Fed rate cut may not benefit the mortgage rates.

If you are considering a home equity loan, you will benefit from the interest rate cuts. They are directly tied to the prime rate which moves in sync with the Fed rate. So, now may be the time to get those needed repairs or improvements done on your largest investment, your home.

If you are a credit card user carrying a balance, you may see a reduction in your interest rate very soon and hence likely a reduction in your monthly payment. Those with excellent credit may benefit even more as your interest reduction will likely be lower than others with a moderate credit rating. Regardless of your status, if you notice a lower monthly payment, take the opportunity to continue paying the previous higher amount, if not more. This will assist in lowering your principle debt much faster.

If you are a considering a new car loan, there’s not much to get excited about. Even though car loans are affected by the Fed rate cuts, they basically bare little change as they are short-term loans. The amount of savings will be negligible and therefore you need not run out and buy a new car based on those expected interest savings.

Phelicia researches and writes about financial topics that affect our everyday lives. She and her husband actively maintain a website which provides all types of major credit cards to meet your financial needs.

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