How does today's half-point interest rate drop affect us normal everyday consumers, in the immediate future??

[PeeluckyDuckee]

Is the move aimed at us laymen, businessmen, or large corporations and businesses?

How would it affect you american folks down south? As far as mortgages goes, I heard from my uncle that its different from up here in Canada, that you guys sign up at a fixed rate for the long haul of 15-25yrs, is that correct? If so, the rate drop wouldn't affect your mortgages, correct? What about automotive?

Up here in Canada, we can choose between fixed rate, variable rate, short term (1,2,3 yrs) or long term (5,7,10 yrs) as far as mortgages goes. So the drop may mean a slight savings for those who make changes to their mortgages right now? The lending rate for automobile is already quite low, I'm seeing lows of 1.9% to 0.9% already. But not sure if the interest rate has already been calculated into the price of the automobile itself, thus can afford to provide low interest rates on cars?? Not sure...

What about credit card rates? They slow to react to such changes?

With today's interest drop, does the feds hope to stabilize the economy, resurrect consumer confidence, or cushion the drop? I beleive the people who benefit most are businesses, would you agree? To help cushion their losses? Consumer spending at such times is prolly going to drop slightly, that would be my guess. No big spending.

Plucky

 

[jehh]

It doesn't really...

It affects banks, corporations, etc...

It does affect the econemy, but in a round about way...

It works, but takes 6 to 9 months to have much effect...

Doing it today was more because it was so expected, and the sell-off would have been really nasty without it...

Should have dropped 75 basis points IMHO, something to spark the market, but oh well...

Jason

 

[Superdoopercooper]

The FED cuts, SOMETIMES, have an effect on mortgage rates and car loans rates, but it is rarely 1-to-1. Example... as I was buying my house a few years ago... the goonish FED raised rates... and my mortgage went up along side it. Maybe .25% for every 0.5 of fed change. On the upside it seems to track a little better. But now, the FED rate is SO low, that there isn't much lower banks can go without getting washed. They still need to profit.

A lot of car loan stuff relies on the 1-year T-bills and stuff like that I believe, and mortgage rates are closely linked to the 10-year T-bill or govt. bond. And these things are affected by the overnight fed funds rate, which is what has been dropping lately.

On the 0.9 - 1.9% car loans you are seeing... that is because car manufacturers are getting taken to the cleaners right now. They are doing ANYTHING to get rid of inventory. Notice how you don't see to many japanese or euro models with those kind of interest rates do you?? Only on Ford and GM and Chrysler... cause they are in much lower demand than the foreign models. Unfortuantely, but I do feel foreign models are better.

Credit cards sometimes lower their rates.. but usually only if you ask them. They are out to suck dry that person that decided to charge a TV they couldn't afford.

Businesses ARE the ones who benefit most... because they often use short term financing to cover costs or parts or whatever. Anything more into the business realm, I dunno... but the idea is to get business doing more capital spending and stuff.

Hope this helps.

 

[woodie1]

The average Joe should see the interest rate on his credit cards go down. Many are PRIME + X Points. Might lower the rates on car loans too. Otherwise there won't be much for the guy on the street.

 

[PeeluckyDuckee]

Those who are on student loans have a variable rate of prime + 2%. Well, that's what they charge me when I had an outstanding loan from the government.

But I agree, it benefits businesses mostly. For consumers, the effect prolly won't be noticed immediately in a significant manner, it will slowly trickle down to them.

As for credit card companies not wanting to lower CC rates, I can see why, even 1/4 point moves can mean millions for them in lost revenues.

What's this reserve you american folks have down there that the $40 billion dollar emergency fund will dip into? A kind of national surplus or security reserve?

Plucky