Federal Reserve slashes interest rates: What does it mean for you?

Published: Mar. 3, 2020 at 4:06 PM EST
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(03/03/2020) - On Tuesday, the Federal Reserve slashed interest rates by half of a percentage point in response to growing concerns over COVID-19 and the risk it may pose to the economy.

So what does the lower rates mean for consumers?

Jim Papatheodore with Mortgage 1 Inc. in Fenton said the rate cut does not affect mortgage rates directly, but it does open the door to refinancing a mortgage.

"Mortgage rates are actually at an all time low. They're lower than they've ever been. I have clients that have purchased within the last 12 to 18 months that are coming back to me now that are lowering their interest rates sometimes a good 1% in that short period of time, which is unprecedented," Papatheodore said.

He says just because rates are even lower now, that doesn't mean it makes sense for every homeowner to refinance. Papatheodore recommends sitting down with a mortgage loan officer to thoroughly review your situation and weigh the pros and cons, because sometimes the best move is to just stay where you're at.

"Someone that shouldn't refinance is they have maybe a smaller loan amount, not much time left on their mortgage. If they don't want to pay their out of pocket costs and want to roll all that into their new loan, then sometimes that doesn't make sense," he said.

And it's not just homeowners that may benefit. According to the Wall Street Journal, credit card holders could see lower APR's in the coming months.

However, those with high yield savings accounts and Certificates of Deposit may actually lose money because those interest rates are tied directly to the federal rate.

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