The Federal Reserve’s third interest-rate cut since September should continue to lighten consumers’ debt burden. But the bigger benefits could come later, if the cuts succeed in shoring up jittery credit markets and staving off an economic downturn.
The prime rate, a benchmark for consumer and business loans, now is 7.25 percent, down from 8.25 in August.
“If you have an adjustable-rate mortgage, this should eventually pay off in lower monthly house payments. However, you will not see any relief until your mortgage rate’s next scheduled reset,” ‘s Chris Kissell said.
As with past cuts, lower rates on home-equity lines of credit and variable-rate credit cards should follow soon. Although not directly linked to the Fed action, rates on 30-year mortgages are now about 5.8 percent versus 6.8 percent in June, a significant savings.
Rate cuts carry a risk of stoking inflation, which may be one reason the Fed limited this one to 0.25 percent. Lower interest rates also make the returns on fixed-income investments in the U.S. less competitive and contribute to a weaker dollar.
Federal Reserve Chairman Ben Bernanke
