Following a report that the economy expanded an anemic .60 percent in the final quarter of 2007, the Federal Reserve s central bank cut key interest rates another 50 basis points to 3.0%. That is the target rate at which banks borrow money overnight from each other.
A lower target rate also lowers the prime rate for consumers. Immediately rates on credit cards, car loans, and home equity lines of credit should improve.
Whether or not mortgage interest rates will continue to drift downward remains to be seen. Mortgage interest rates are tied to long-term mortgage backed securities. If the bond market believes inflation is under control, borrowing rates will decline further.