Missoula Financial Advisor on Fed Cutting the Prime Interest Rate

Missoula, MT (KGVO-AM News) - Financial markets are responding favorably to the announcement by the U.S. Federal Reserve this week that the benchmark Prime Interest Rate has just been cut by a full half a point.

I spoke to Talk Back guest and financial advisor Bob Seidenschwarz on Thursday about the long-anticipated move.

The Federal Reserve Cut the Prime Interest Rate by a Full Half a Point

“First, it was a 50 basis point cut, that’s half a percent, and the market had been betting on whether he was going to do a quarter or a half, and if he was going to do the half, we'd all be happy, and at least for today, Peter, we're all happy,” began Seidenschwarz. “The indexes are up pretty strongly today based on that half-a-percent cut.”

Seidenschwarz said the move is a signal that rates will continue to drop and further encourage economic growth.

Seidenschwarz Said the Cut May Lead to Further Reductions in the Future

“Anybody out there that has a mortgage or car payment, a credit card, or anything that has an interest rate attached to it, saw the increase in the payments that they had to make,” he said. “Now this is important. This will eventually lend itself to rates coming down, as the Fed has intimated. But more importantly, to you and me it means that we're going to be paying less for the debt issues that I just mentioned.”

Seidenschwarz was careful to emphasize that your current home loan interest rate will not change and that borrowers will have to refinance at the new rates.

“It's no different than if you were buying the property for the very first time,” he said. “That individual should walk you through each step of your additional new cost. “You may ask, why do I have to apply for new title insurance again, which you will, because every step of the way is literally being done for the first time, if that makes sense to you. That person (your advisor) should say, ‘hey, you need, about two percentage points difference in current rates for it to make sense for you to refinance’.”

READ MORE: It’s the Same Old Song With the Markets Says Missoula Advisor

Seidenschwarz Encouraged Investors to Watch Financial Markets Closely

Seidenschwarz said Americans should keep a close eye on financial markets over the next year to determine any significant changes in their investments.

“The expectation is over the next 12 to 24 months, is that we will see even lower rates than we're looking at right now,” he said. “I suspect you're going to need at least a good year before you see a meaningful change in the interest rates across the whole spectrum of interest rate bearing type of assets.”

Click here to read the actual statement by the U.S. Federal Reserve.