Is now the best time to pounce on refinancing options?

There is one major plus side to all the big problems on Wall Street (besides seeing Jim Cramer flip out), and that’s Uncle Ben Bernanke wailing away on the Federal funds rate. This is the interest rate level at which banks lend other banks money.

A few times a year The Almighty Federal Reserve, chaired by ‘Ole Graybeard’ Bernanke, likes to kick back and have a few beers with the bros while discussing whether to cut or raise the interest rate level.

From August 2006 till August 2007 the discount interest rate held steady at 6.25%. But all that hit the fan when the sub-prime loan meltdowns and credit crunch started to cause problems at the end of the summer 2007. There have been 8 planned and unplanned rate cuts since then. Going into today’s meeting the rate was set at 2.25%.

Today ‘da Fed’ continued to lower that rate with another .25% (or 25 basis points) reduction, making things nice and even at 2%. This is good for consumer and business loans (car loans, student loans, etc.) because it caused the prime lending rate to also be reduced down to 5.25%.

The reason the Fed cuts these rates is to promote consumer spending and lending, something that has been severely lacking in these credit crunch/ sub-prime days. After this cut, most people are predicting we won’t see any further until the Fed raises them again in mid-2009.

What’s all this mean? Time to refinance!

If you’ve got adjustable loans, now is the time to go out and find a sweet fixed rate loan (if you can find one). Don’t keep waiting around for another rate cut, because that looks unlikely.

The Fed will probably keep steady for a while in order to curb the fears of rising inflation. The lower the interest rate, the higher inflation tends to creep.

Do you have a different strategy or plan of attack for these rate cuts? Let us know in the comments section if so or if you think the Fed should keep cuttin’.

Fox Business: Fed Cuts Key Rate By .25%, April 30, 2008