Fed plan sparks home loan rate relief

Published: Nov. 26, 2008 at 7:01 AM

WASHINGTON, Nov. 26 (UPI) -- The U.S. Federal Reserve's stimulus plan delivered relief to home mortgages but its effect on other consumer loans remains unknown, industry observers said.

The Fed's $200 billion plan to boost spending inspired a drop in the average rate for a 30-year, fixed-rate mortgage from 5.8 percent Monday to 5.5 percent Tuesday, The Washington Post reported.

"You should see mortgage rates near or about 5 percent by early next year and that should mean smaller payments that people will have to pay on loans," Guy Cecala, publisher of Inside Mortgage Finance Publications, told the Post.

How the credit card industry will respond to the plan, expected to go into effect in February, remains unknown, consumer advocates and analysts told the Post.

While people with good credit may have an easier time getting a credit card or consumer loan, advocates and analysts said consumers with bad credit shouldn't expect any favors because more financing is available, the newspaper said.

Students seeking college loans may see more money available through private sources but analysts disagree on whether the Fed's plan will help this segment.

Peter Mazareas, vice chairman of the College Savings Foundation, a non-profit in Detroit, said he thinks the plan will make private student loans more accessible as well as lower rates.

Mark Kantrowitz, publisher of FinAid.org, said he isn't so sure.

"At face value, I don't think this is going to yield many benefits for students," he said to the Post.

© 2008 United Press International, Inc. All Rights Reserved.
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