For the first time in over four years, the Federal Reserve cut its Fed Funds Rate, which may directly impact millions of American borrowers. There is still question among experts about what impact this reduction will have on the economy. The Federal Reserve reconvenes in six weeks, and it is uncertain how market volatility and inflation concerns will affect their future policy and further rate changes.

We now need to wait for the banks to follow suit and lower the Prime Rate.  The chart reflects how Fed Funds Rate cuts do not translate into reductions in fixed-rate mortgages. In January 2001, the Fed Funds Rate was at 6% and 30-year fixed rates averaged 7.03%. By December 2001, following 4.25% in cuts throughout the year, home loan rates were actually up to 7.07%.