Please Scroll Down to See Forums Below 
S
Spartacus
Guest
Discount Rate (Currently 6.25%)
The Discount Rate is the interest rate the Fed offers to member banks and thrifts who need to borrow money to avoid having their reserves dip below the required minimum. The higher the discount rate, the higher mortgage interest rates will be. When the discount rate goes up, the prime rate goes up as well, which slows the demand for new loans, and cools the housing market.
The opposite is also true. If the fed lowers the discount rate, the prime rate will come down, and mortgage interest rates will dip to more favorable levels. This can boost a slumping housing market.
Prime Rate (Currently 8.25%)
Prime Rate is the interest rate offered by commercial banks to it’s most valued corporate customers. The prime rate is also the basis for many mortgage programs, including Heloc’s (Home Equity Line of Credit), which many banks offer to homeowners at prime plus X amount, prime minus X amount, or simply prime plus zero.
The prime rate always adjusts according to how the Fed changes the discount rate.
Federal Funds Rate (Currently 5.25%)
The Federal Funds Rate is what banks charge one another for overnight use of excess reserves. Banks avoid dipping below their required percentage of money on reserve by borrowing from one another.
The Fed uses the federal funds rate to control the supply of available funds, essentially controlling inflation. If the federal funds rate is low, banks will be keen to borrow from one another, using the reserves to grant more loans which in turn feeds the economy. If the Fed feels the need to slow things down, they will simply raise the federal funds rate, which will curtail borrowing among banks and reduce the amount of new loans.
The Discount Rate is the interest rate the Fed offers to member banks and thrifts who need to borrow money to avoid having their reserves dip below the required minimum. The higher the discount rate, the higher mortgage interest rates will be. When the discount rate goes up, the prime rate goes up as well, which slows the demand for new loans, and cools the housing market.
The opposite is also true. If the fed lowers the discount rate, the prime rate will come down, and mortgage interest rates will dip to more favorable levels. This can boost a slumping housing market.
Prime Rate (Currently 8.25%)
Prime Rate is the interest rate offered by commercial banks to it’s most valued corporate customers. The prime rate is also the basis for many mortgage programs, including Heloc’s (Home Equity Line of Credit), which many banks offer to homeowners at prime plus X amount, prime minus X amount, or simply prime plus zero.
The prime rate always adjusts according to how the Fed changes the discount rate.
Federal Funds Rate (Currently 5.25%)
The Federal Funds Rate is what banks charge one another for overnight use of excess reserves. Banks avoid dipping below their required percentage of money on reserve by borrowing from one another.
The Fed uses the federal funds rate to control the supply of available funds, essentially controlling inflation. If the federal funds rate is low, banks will be keen to borrow from one another, using the reserves to grant more loans which in turn feeds the economy. If the Fed feels the need to slow things down, they will simply raise the federal funds rate, which will curtail borrowing among banks and reduce the amount of new loans.
