Released: September 18, 2007

Can consumers cash in on Fed rate cut?

Source: Emily Brandon, US News & World Report

Mortgages, home equity lines of credit, auto loans, credit card rates, certificates of deposit, and money market accounts can all be influenced by changes in short-term interest rates set by the Federal Reserve. But don’t count on getting a lower interest rate; first, read the fine print in whatever contract you’re signing. The only interest rate that will automatically drop is the federal funds rate, which is what banks charge each other on overnight loans. Here are some ways to make the most of the rate cut announced by the Fed Tuesday:

Watch the market for lower rates. The Fed’s rate cut should provide a measure of relief to borrowers anticipating rising payments on their adjustable-rate mortgages. “Borrowers facing resets will still see a sizable payment increase compared to the initial payment when the loan was initiated several years ago, but that increase will be substantially lower than it would have been had the Fed not changed interest rates,” says Greg McBride, a senior financial analyst with Bankrate.com. The savings won’t be huge, though.

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