1st of all this guy is Jim Jubak , MSN Money Senior Markets Editor. For a senior Markets Editor, I am very surprised.
What is this guy talking about. The average person won't see any changes, my butt!!!!!!!!
He should have made a number of disclosures and if he was going to generalize and down play the Fed's next interest rate cut he should have said he was going too...
All sorts of analysts and individuals have their own opinions of the economy and the housing market.
Let me make a few comments or points to this affect, I would have loved to email this guy.
- The number one group of average Americans that will be effected by this rate cut will be a group that is primarily responsible for this freaking boondoggle.
These are all the people that have HELOC or ARM financing on their homes that very well may follow the WSJ prime rate. Which is directly effected by a rate cut action of this sort.
The rate cut may very well not effect new loans as our genius so eloquently states or bail large funds or investors out of their own nooses.
But this is a trickle down effect. As well as even MSN so graciously provides that average Americans keep balances in excess of thousands of dollars on credit cards.
Did we forget that most Credit Card Accounts are variable APR's that , (OMG) follow the WSJ prime rate. Cutting federal funds rate by 25 basis points or a 50 basis points, which I personally would love to see; will directly effect many Americans.
Do the math lets use a $50,000.00 HELOC account that maybe some person is getting raked over the coals with as an interest only account at 12%. Yes everyone will have an opinion here, however this post is not directed at the financing. It is merely a simple example.
The monthly payment is a $500.00 interest only. Give a 50 basis point adjustment and the payment goes to $492.00 per month. Yes it is only $8.00 but a little relief is better than none.
If we get it down a full basis point and and that same payment will adjust to $458.00 a savings of $42.00 / month and for a full year that is a savings of $504.00 for a year. Now I think if you ask anyone and they wouldn't pass up that sort of money.
Now do that same thing for a credit card balance. I am sure you get the picture.
So to state that cutting the federal funds rate will not help the average American. I think is quite an understatement.
As long as lenders keep lending standards at a resonable standard and not allow sub prime borrowers or people that have no intention of paying back borrowed money to borrow it. Lowering the federal funds rate should not be of concern. It was not the fed that allowed sub prime borrows borrow money they never intended in paying back. However, that is an entirely different subject.