Yesterday the Federal Reserve made a drastic cut to interest rates. 50 basis points. While half a percentage point may not seem like a lot, the effects of the Fed rate cut will benefit some people. While it may not be enough to dramatically affect your first home mortgage, some with adjustable rate mortgages and mortgages with rates due to reset over the next year, will find that increases won’t be so onerous. Here is what Bill Liss has to say about who will benefit from the Fed rate cut:

Consumers will reap the benefits quickly as interest rates will fall on
certain types of credit card debt as well as on home equity lines of
credit that many homeowners use to pay down medical expenses and home
improvements. Also benefiting, home owners who face adjustable rate
mortgage interest increases. Those rates will still go up, but less
than previously expected. That, alone, could forestall the significant
rise in foreclosures, being fueled primarily by homeowners who cannot
meet monthly payments on skyrocketing adjustable interest rates.

For some, however, the Fed rate cut will be of little help. Borrowers who have subprime loans may not be able to refinance to the lower rate, due to credit risk, and others may not be able to because many subprime loans come with prepayment penalties which they would be unable to pay.