MoneyCafe.com

After yesterday’s rate reduction, we thought we would check to see how lending and deposit rates would be affected.   We waited until the afternoon to make sure banks had a chance to update their offerings.  This is a look at some of the best interest rates for deposits and loans from national banks and lenders. 

Generally, a drop in the Fed Funds Rate and the Prime Rate do not have a direct effect on mortgage rates.  However, yesterday the Federal Reserve indicated they would be buying mortgages and keeping rates low for a while.  This seems to have dropped mortgage rates further since our Monday survey.  Deposit rates have not dropped across the board, although we anticipate this will happen within the next week.

Rates are APY (Annual Percentage Yield)

Rates are APR (Annual Percentage Rate)
Assumptions:  $320,000 conforming loan, 20% down, excellent credit, documented income,
California property 

We have completed our bank survey.  The Prime Rate was lowered today from 4.00% to 3.25%.

We anticipate the Prime Rate will be lowered by banks today to 3.25% and will update our Prime Rate Page upon completion of our comprehensive bank survey.

Wells Fargo has already announced the reduction in their rate to 3.25%.  JPMorgan Chase and Bank of America have also announced the same reduction. Wachovia has followed.

The Federal Funds Target Rate was reduced today to 0.25% or Lower.  They now have a target range of 0.00% to 0.25%.  See http://www.federalreserve.gov/newsevents/press/monetary/20081216b.htm. 

This is a historical low for the Federal Funds Target Rate.  The Fed Funds Target Rate is a short-term rate objective of the Federal Reserve Board.  The actual Fed Funds Rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.  The real rate changes daily but is usually close to the target rate desired by the Federal Reserve.  Lately the actual rate has been considerably lower.  For example, last month the target rate was 1.00%, but actual rate averaged .39%.  Yesterday, the target rate was 1.00%, but the actual rate was .11%.  You can find the actual rate at http://www.moneycafe.com/markets/interestrates.htm?qm_target_page=Rates.  The symbol is !FFUNDS.

We now anticipate the Prime Rate will be lowered by banks today to 3.25% and will update upon completion of our bank survey.

The Federal Reserve is considering today whether to reduce the Federal Funds Target Rate and will announce the decision at 2:15 p.m. Eastern.  The consensus seems to be they will drop the rate .50% to an all time low of .50%.  If this happens, we anticpate the Prime Rate will also drop by .50% and we will take a bank survey this afternoon to confirm.

Check back later for an update.

Banks lowered the Prime Rate today by 1/2 point to 4.00%.

This was in response to a  1/2 point reduction in the Fed Funds Target Rate by the Federal Reserve, which lowered its target rate for the second time this month.  The next regularly scheduled Fed meeting in set for December 16, 2008.