Fed Drops Interest Rates, East Texans To Benefit - KLTV.com - Tyler, Longview, Jacksonville |ETX News

6/25/03 - Tyler

Fed Drops Interest Rates, East Texans To Benefit

Wednesday, the federal interest rate was cut by a quarter of a percentage point to its lowest level since 1958.

The reduction means a lot for people like Tyler's Linda Woody. Linda bought her house with a thirty year mortgage in 1996, at a rate over eight percent. With interest rates dropping, she just refinanced.

"I was able not only to refinance but to go from a thirty year note to a fifteen year note at a five percent rate," Linda explains. "and my payments were even less."

"I was paying five-forty-something. I'm paying about five fifteen now."

Because she took advantage of the lowered interest rates, Linda estimates she could save fifty thousand dollars on her house. Experts say that's where the boost to the economy comes from.

"It has a trickle-down effect to all of us," certified financial planner Jose Feliciano explains, "and we all benefit for that."

The idea behind the rate drop is a simple one. When people and businesses lower their expenses, they make more money, which filters back down and expands the economy.

"It all affects us," Feliciano says. "When they have more profits, it affects us through our 401(k) plans and our mutual funds, so it does have a trickle down effect all the way into our pocket book."

So in theory, Linda's lowered payments are good for everybody, even people who don't take direct advantage of the lowered interest rates. Linda feels like she's saving more than just money.

"It really helps me to have a better look at my future," she says, "and getting done what I wanted to accomplish in a lot less time."

And what's good for Linda, the fed hopes is good for all of us.

Reid Kerr (rkerr@kltv.com) reporting.

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