Prime Rate - The Prime Rate is the interest rate charged by banks for short-term loans to their most creditworthy customers. It is also used by lenders as an index for equity lines of credit (ELOCs) in addition to other floating rate loans. Each bank sets their own Prime Rate as they see fit. The Wall Street Journal publishes the Prime Rate that is the base rate on corporate loans posted by at least 75% of the nations largest banks.Over the last 10 years, the prime rate has averaged approximately 7%.
If Alan Greenspan and the Federal Reserve raise the short term interest rates by 25%, you will see a 25% increase in the Prime Rate.
The Prime Rate is affected by the Federal Reserve Boards actions to control inflation. The board will raise or lower what is called the discount rate which directly affects the prime rate. The discount rate is raised when their is a threat of inflation and is lowered when there is a fear of recession.
Prime Rate is not directly correlated with mortgage rates but most compensating factors are. So when there is movement in the Prime Rate you will most likely see movement in current mortgage rates.
While the Prime Rate affects Home Equity Loans and short term money, the 30 year fixed mortgage is based off of the mortgage backed security.
A rate index which is the prevailing rate that banks charge to lend money to corporations.
Unlike the Fed Funds Rate and the Discount Rate, the Federal Reserve does not set a target for the Prime Rate. Nonetheless, when the Fed raises or lowers the target for these two short term rates, Prime Rate almost always follows suit because of the change in the cost of money.
Prime rate is the interest rate which banks will charge to their best customers. Any adjustments to the prime rate are publicized in the news and are what moves the indexes in most adjustable rate mortgages, especially HELOCs. Adjustments in the prime rate do not usually affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.
The Federal Reserve Board also know as the FED is controlled by Board of Governors which consist of seven elected officials. These individuals use many factors when determining whether to lower are raise the rates. In fact if you want to get real technical the FED doesn't actually raise or lower rates. They control the monetary policy which in turn affects the interest rate movement up or down.
Prime Rate - Prime rate is one of the most publicized indexes in the news media. Prime rate is used as one of the indexes in adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, however the same factors that affect the prime rate also influence the interest rates of mortgage loans. Prime is an interest rate that banks generally charge to their preferred customers.
Recently, the prime rate, which is a short-term interest rate, has been increasing faster than the rates on longer term bonds. As a result, if you have a home equity line, you may want to consider refinancing it into a fixed-rate second which will likely carry a lower rate which will not change with the prime.
The Prime Rate is generally know as the rate that which banks will charge to lend money not only to their best customers but also to other banks. Many homeowners have become excited when finding out that a Home Equity Line of Credit is available at the prime rate, thinking they are getting the money for the same rate as the bank's best customers. While that may be true, the fact is that when banks lend money at prime to their best customers it is usually unsecured rather than having to pledge real property as security as in the case of the Home Equity Line of Credit.
The Federal Banking Commission gathers usually 4 times per year, to decide whether they will raise, lower, or maintain the current Prime Rate.
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