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Home Ownership Preparation :: Current Prime Interest Rate
Current Prime Interest Rate:
Understanding how the Current and Future Prime Interest Rate Affects Your Mortgage
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The current prime interest rate is the rate that most commercial banks charge their highest credit-worthy customers.
It’s the advertised rate, the one available on approved credit and it’s typically given to large corporations with great credit score. The official Prime Rate is based on rates charged by at least three-quarters of the country’s banks.
So, how does the current prime interest rate affect you, the new homeowner? Well, most mortgages, fixed rate and adjustable rate, are based on the prime rate give or take a point or so.
Where to Find the Current Prime Rate
You can go to Bloomberg, the Wall Street Journal or a site like Bankrate.com and find out the current interest rates quickly.
These are updated regularly and are based on surveys of local banks across the country. You should also find them published in the finance or business section of your local newspaper.
The most commonly used Prime Rate Index is the one published in the Wall Street Journal. It’s known as the Wall Street Journal Prime Rate (WSJPR).
The current, published WSJ Prime Rate as of January 2009 is 3.25%, an absolute low particularly when compared to the massively high rates of the late nineties (9.25% for example).
What the Current Prime Rate Means to You
As mentioned earlier, if the current prime interest rate falls, so do mortgage rates and if the prime interest rate rises across the country, then so too do mortgage rates. That’s why you want to keep your eye on the interest rates.
You see, if you’re planning to buy a home and the interest rates happen to be at a 40-year low, it’s probably in your best interest to lock in a fixed rate mortgage at a low rate.
However, if interest rates go up by the time you get around to actually buying a home, you may want to consider taking your chances with an adjustable rate mortgage.
In addition, the Prime Rate is used directly for calculating the rates charged on adjustable rate mortgages and any other variable rate and short term loans.
Typically, an adjustable or variable rate mortgage’s interest rates will be based on Prime plus a certain percentage or number of points.
So, if you have an adjustable rate mortgage and the published Prime rate goes up, your monthly mortgage payments will go up along with it.
Will the Prime Rate Go Up or Down?
Figuring out whether the current prime interest rate will go up or down is a question economists try to answer every day.
For the moment, the prime rate is at an absolute low and it’s staying that way for a while, but most experts agree it has to come up sometime and it looks like this is the year for that to happen.
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Home-Ownership-Preparation.com :: Current Prime Interest Rate