When the interest rate is changed, are savings or loans effected?
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Both got affected. Using the recent Fed rate cut as an example, the consumers can pay lower credit card rates, and if your have a variable rate loan, the rate will go down when the next time it resets. On the other hand, if you are a big saver, you will see you dividend income going down since you won't see many 5% CDs anymore.
On the Corporate side, this is certainly good news for these FIs who have a ton of RE loans. Now the delinquency and loan charge-offs will go down since borrowers can refinance their ARM and higher rate fixed rate loans to lower fixed rate or variable loans. Also, this will give FIs room to lower the dividend rates, which at the end can offset some of the interest income losses from the RE and Credit Card loans.
When the interest rate is changed, are savings or loans effected?both. sucks that b/c of all these foreclosures, the fed wants to cut the rate, and financial people say it won't even hep that much. But it hurts, and not that much either unless you have a crapload of money tied up, the people who have the wits about them to have money in a CD, etc and not risk all they have on an adjustable rate mprtgage without first knowing if they could afford the motgage if the rates went up. I guess they never thought the rate would change...but if anyone gets a mortgage, they should make sure that they will be able to afford it even in the most dramatic of situations,like the chance that the interest rate would double...then we wouldn't be in this foreclosure mess!
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