 Prime Rate, LIBOR Rate and more.
The Prime Rate
is one of the most popular financial indexes used for
consumer loan products such as home equity loans, small
business loans, credit cards, personal loans, student loans,
insurance products and many more consumer financial
products.
Many consumers
believe the prime rate used for consumer loan programs is
equivalent to the fed's interest rates however the prime
rate (which many of us pay interest on) averages around 3
percent over the federal funds rate.
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The prime rate
which we hear about, read about and secure financing with is
commonly known as the WSJ prime rate - WSJ standing for the
Wall Street Journal.
The easiest way to understand movements in the prime
interest rate is to understand how the Wall Street Journal
defines or warrants a change in the prime rate. Not all the
time will the prime rate change when the Fed lowers rates
but a change is warranted when the formula dictates - this
formula used being ..
"When 23 out
of 30 of the United States largest banks change their prime
rate, the Wall Street Journal then prints a prime rate
change"
Good news is
the prime rate is still at one of the lowest levels in the
history of interest rates so now may be a very good time to
consider switching to a fixed rate.
LIBOR Rate
The LIBOR is an
extremely critical index as changes to the LIBOR rates
determine how risk adverse banks are to lend funds to each
other which can signal very important movements in the
financial world.
View and Learn about the LIBOR rate here
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