What Interest Rate Cuts Mean to You
When the fed lowers interest rates and gets everyone all excited, what do these lower interest rates really mean to you and me?
Homeowners: You could save hundreds of dollars a month if your loan is pegged to Treasury rates, which have fallen considerably thanks to the Fed's recent cuts. But many buyers in expensive areas resort to so-called jumbo loans, which are typically pegged to slower-moving indexes that remain elevated.
Borrowers: Several banks lowered their prime rate, which forms the foundation for car loans, home equity lines and other loans. But you must carry a whopping $5,000 credit card balance to save just $12.50 annually from a quarter-point rate cut.
Consumers: Lower rates threaten to boost inflation and the price of imports. So far, inflation has been held in check, and foreign companies generally are holding the line on prices.
Savers: Falling interest rates normally would whack rates on CDs and other savings. But the cash crunch has spurred many banks to prop up such rates.
Travelers: International vacations and business trips cost more because the dollar has sagged in the wake of the Fed's cuts. But it could be buoyed if other central banks trim rates.
So, before getting all excited about the Fed lowering interest rates again, stop and ask yourself, "What will an interest rate cut really mean to me?" The answer will probably be, "Not much."
We'd love to hear your opinion about this if you'd like to leave a comment. Click the "comment" link below to tell us what you think about interest rate cuts.
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