| Interest rate cut spooks skeptics
The Federal Reserve handed out a second interest rate cut on Halloween, giving markets and borrowers the treat they were expecting. But skeptics questioned whether the quarter-point rate cut aimed at shoring up the housing market would unleash the specter of inflation on a day where gold and oil prices hit new highs. "If they hadn't cut interest rates, it would have been a disaster," said Ashwani Kaul, a senior analyst with Reuters Estimates in New York. Stock investors had priced in a cut, and the absence of one would have spooked markets in a big way, he said. The Dow Jones industrial average rose 137.54, or 1 percent, to 13,930.01, while the Nasdaq composite index rose 42.41, or 1.5 percent, to close at 2,859.12 Wednesday. Consumers should benefit from the Fed action via lower costs on variable-rate credit cards, auto loans and home-equity lines of credit, said Scott Anderson, a senior economist with Wells Fargo in Minneapolis.
The Fed is on your side
Since the Fed rate affects how much consumers pay on credit card debt, home equity lines of credit and auto loans, consumers' monthly debt obligations should slide along with the rate cut. For home owners with home equity lines of credit, it shouldn't be long before they see lower monthly loan payments. "That rate will drop three-quarters of a percentage point fairly soon," said Holden Lewis of Bankrate.com. "Probably in about two billing cycles." The Fed's dramatic rate cut - its largest since 1984 - won't do much to help consumers with their credit card debt, however. According to Bill Hardekopf, chief executive of LowCards.com, credit card issuers may choose to lower their annual interest rates by three quarters of a point. However, for a balance of $5,000, that amounts to only $3.13 a month.
Banks See Spike In Refinancing Applications
MADISON, Wis. -- Refinancing applications have surged 17 percent after interest rates dropped three-quarters of a point in the past week -- and they could go lower. VIDEO: Watch The Report But financial experts said it is important to know when it's best to refinance and if the type of loan a consumer has is even affected by this week's federal rate cut. Don Bertucci, AnchorBank's senior vice president of residential lending, said the last few days have been hectic. He said the phones have been ringing and the online applications have been coming in, all in response to this week's rate cut by the federal reserve. So, what does the 0.75 percent rate cut mean for residents? "It would affect mostly second mortgages or home equity lines of credit, where the rate is adjustable," Bertucci said.
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