Rate Cuts May Set Table for Refinancing
RENEE MONTAGNE, host:
And the Federal Reserve had shaved another one half point off the key interest rate. The federal funds rate is now 3 percent, the lowest it's been in roughly two and a half years.
NPR's Wendy Kaufman has some answers on what that means for the consumer.
WENDY KAUFMAN: With interest rates falling, this may be an excellent time to refinance your home. Rates, says Gail Cunningham of the nonprofit National Foundation for Credit Counseling, are now hovering at about 5.5 percent for a 30 year fixed rate loan.
Ms. GAIL CUNNINGHAM (National Foundation for Credit Counseling): That's an excellent rate. You know, balanced against what it was last year at this time, it was it was 6.32 percent.
KAUFMAN: Individuals with variable or adjustable rate mortgages that are about to reset will see their rates go up, but not quite as high as they might have been without the Fed's intervention. Nonetheless, experts say that many people with variable loans would be better off with fixed rate ones and should switch. With respect to credit cards, most have pre-set rates, so they won't change automatically. But Cunningham says with interest rates falling, your bank may be willing to cut the rate on your credit card, if you ask.
Ms. CUNNINGHAM: I'm going to suggest that people look at your interest rate and if it's 10 percent or above, pick up the phone and start calling.
KAUFMAN: Individuals with good credit may be rewarded, and if not Cunningham suggests looking for another credit card issuer, one with lower rates. Other items? Home equity loans, which are often linked to what the Fed does, are likely to be lower in the coming days, as will car loans for new buyers.
Finally, while much of this is good news for borrowers, it's bad news for savers. Rates on certificates of deposit are declining at a time when inflation is rising. Nationwide, the average rate for a one year CD is just over 4 percent and could drop even more.
Wendy Kaufman, NPR News.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.