Not necessarily.

The Fed Funds Target Rate  is the interest rate that a bank pays to borrow money from another bank or the Federal Reserve. That is the rate they change to try and get banks to borrow money so they can lend it out there to businesses and municipalities.  The Prime rate changes with that and is usually around 3% higher.  The prime got its name from “premium customer”. The Prime interest rate is one used for banks to lend to their customers, typically for short term money.  It does not affect the mortgage rates.

 

The lower prime rate change will lower the interest rate for any of the below if they are linked to it:

 

• Home equity loans
• Auto loans
• Student loans
• Credit cards

 

Therefore, when the Prime goes down, mortgage rates might not necessarily move down.  They could in fact go up based on other economic factors.  You have to look at the big picture with things such as inflation, unemployment price of oil, gold and our dollar!  Here’s my advise. Call a professional and get the real numbers.

Dale Siegel