May 10th, 2020 11:40 AM by Jackie A. Graves, President
For everyday Americans
with good credit, historically low interest rates can be a lifesaver.
Riskier borrowers will
have to look elsewhere for relief.
The Federal Reserve said Wednesday it would keep its benchmark interest
rate near zero in response to
the economic shock from the coronavirus crisis.
significant responsibility of the Fed now is to make sure that credit markets
continue to function,” said Greg McBride, chief financial analyst at
Bankrate.com. “Without functioning credit markets, there will be no economic
To that end,
the central bank has expanded the number of cities and counties eligible
for municipal lending, to keep money
flowing to local and state governments.
than 26 million people
out of work and a growing number of Americans feeling severely
cash-strapped, historically low borrowing rates means that loans are cheaper —
if you can get them.
the federal funds rate, which is what
banks charge one another for short-term borrowing, is not the rate that
consumers pay, the Fed’s moves still affect the borrowing and saving rates they
see every day.
example, credit card rates are down to a
three-year low of 16.46% from a high of 17.85% when the Fed started cutting
rates last July, according to Bankrate.
recent rate cuts have sent interest rate on new credit card offers down to the
lowest levels seen in years,” said Matt Schulz, the chief industry analyst
however, is that banks are making credit cards much harder to get now as they
try to get their footing in the wake of the outbreak,” he said.
worsen, credit card issuers have also begun closing accounts and lowering credit
particularly on those accounts that are at a greater risk of becoming
At the same
time, mortgage rates are substantially lower, to the benefit of
some but not all.
30-year fixed rate is now about 3.55%, the lowest since September 2016,
according to Bankrate.
borrowers that have sufficient equity continue to be able to refinance,”
McBride said. Among this group, “refinancing activity is off the charts.”
lenders have stopped offering certain refinancing options and jumbo mortgage
programs, due to the new risk in the market from the mortgage bailout
part of the CARES Act.
intensity of the crisis means that loan availability is declining and thus the
boost to the economy is muted,” said Tendayi Kapfidze, chief economist at
LendingTree, an online loan marketplace.
homeowners or buyers with lower credit scores, “credit is tightened,” McBride
riskier borrowers who have suffered an income disruption and need to access
cash, now is the time to tap that rainy day fund, if you have one, McBride
said, “If you have emergency savings, this is why you have it.”
Department of Education is also giving most federal student loan borrowers a break from their
monthly bills until at least October.
ask your lender for payment relief.
banks are offering temporary hardship assistance for those
impacted by Covid-19, such as allowing
customers to defer a card payment. Even utility companies and private
student loan servicers are amenable to temporary hardship
accommodations, often on a case-by-case basis.
payment relief on those big-ticket items is really critical to being able to
focus on necessities like food and medicine,” McBride said.
In fact, more
than 90% of Americans who asked for a break on mortgage and credit card bills
due to Covid-19 received one, according to a recent
borrowers said they didn’t realize they had that option, the survey also found.
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