The Feds decided today to lower the prime rate from 7.25% to 6.5%. Needless to say, when I heard this decision, I was floored. It’s great for people that are looking to buy a home, consolidate a loan, or apply for a new loan. The interest rates are down, there will be better lending rates coming out, but this could mean trouble for people wanting to invest in savings accounts or certificates of deposit.
Fed has lowered prime a few times since September 2007. It was then 8.5%, and today is 6.5%. It is almost unbelievable that it has dropped two percentage points in four months.
If you have been considering getting any type of loan, my advice to you would be to wait until mid-February. I am assuming interest rates will be reflecting the decision to lower prime about them. It takes banks awhile to lower their lending rates to reflect the drop in the prime rate. I would wait until Mid-February just to be on the safe side.
If you are looking at investing in a savings account or certificate of deposit, I would shop around, but I would do it quickly. Banks are quicker to drop their savings and CD rates than they are to drop their lending rates unless they are prime based. You are much better off to have your savings account with a high-yielding online bank, such as ING.
Now is the time to buy a house or refinance if you are in the market. Shop around to a few different banks to get the best rate. Always ask if there are any hidden fees or upfront costs. They can get you that way. My best advice to you is be a smart shopper. Call around and see what is the best rate you can get. Knowing is half the battle!