I’m sure you’ve heard by now, Bernanke and Friends cut the Fed Funds rate by 50 basis points to 4.75%. It was the first rate reduction in 4 years, which then spawned the biggest one-day gain in the Dow in about the same time. It seems like everyone has an opinion on the Fed rate cut. Some said it was needed to curb the hysteria and possible recession, while others thought it was just a bail-out for people who took unreasonable risks and now don’t have to pay the price. Personally, I think it’s just trying to delay the inevitable, but I’m no economist. I always try to keep a long-term view on the stock market, so I’m not that concerned there. So how else will this affect things?
Savings Account Rate Drops?
Capital One 360 has already dropped their savings rate from 0.80% to 0.75% APY as of today (plus their checking tiers as well), and I expect some other high-yield savings accounts to follow. I think one hope we have is that banks may want to stay at 5.0% for psychological reasons. If you want to lock in some 6-month or 1-year certificates of deposit, I wouldn’t wait too long to do so. Anybody notice any other drops?
Mortgage Rate Drops?
Personally, I’m hoping that this rate drop doesn’t work, and the the housing market continues to weaken. That way, I can still get a low mortgage rate with our excellent credit, and a house at more reasonable prices! But I wonder if significantly lower mortgage rates will actually occur…