U.S. Interest Rates and Averages
Interest rates are the costs for borrowing money. The calculation for an interest rate is a simple expression of the interest payments as an annualized percentage of principal. Benchmark interest rates are set by an entities like the Federal Reserve, governments or banks and are used to peg other consumer and commercial interest rates. These interest rates determine what we owe on mortgages, credit cards, and loans, as well as what we earn on CDs, savings accounts, money market accounts and checking accounts. MoneyRates.com tracks the latest interest rate news and changes.
| Prime Rate | 3.25% | 30-year Fixed Mortgage | 4.36% |
| Discount Rate (primary) | 0.75% | 15-year Fixed Mortgage | 3.86% |
| Discount Rate (secondary) | 1.25% | U.S. Savings EE Bonds | 1.40% |
| Federal Funds Target Rate | 0% - 0.25% | U.S. Savings I Bonds | 1.74% |
| Broker Call Rate | 2.00% | 10-year Treasury Note | 2.54% |
Different week, but same story for interest rates. How low can they go? Mortgage rates fell again this week according to the most recent survey of American lenders from Freddie Mac. The national average for mortgages now stands at 4.36 percent for a 30-year fixed and 3.86 percent for a 15-year fixed, based on results of the weekly Primary Mortgage Market Survey. The average rate on the 15-year fixed mortgage has set a record low for the seventh consecutive week according to data released from Freddie Mac, providing Americans with another chance to lower house payment with better refinance rates. Adjustable-rate mortgages indexed to U.S. Treasury yields were mostly unchanged last week according to the report. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.56 percent and the 1-year Treasury-indexed ARM average fell one basis point to 3.52 percent. Adjustable rate mortgages tied to the LIBOR index, a common interest rate benchmark, also fell slightly for the week. Although home buying has not picked up as much as economists had forecast, the low level of mortgages rates has helped encourage many homeowners to refinance and remodel existing homes at affordable rates. Check MoneyRates.com for the current mortgage rates including the latest refinancing mortgages rates.
The Federal Reserve met on August 11th and has reiterated their commitment to keep interest rates low for the near future. The Fed has kept the federal funds rate set at 0.25 percent and the discount rate at 0.75 percent, due to sluggishness in the U.S. economy. There has been some internal debate within the Fed regarding the spread between the federal funds rate and discount rate. The Fed has the option to raise the discount rate, without a corresponding rate hike in the federal funds rate, to return the spread to its traditional one full percentage point. This could be a way to tighten monetary policy without hurting the consumers who are dependent upon low rates for credit cards, mortgages and loans. For now, the majority of Fed board members seem satisfied to keep interest rates at historic lows, although Thomas Hoenig of the Kansas City Fed has become increasingly vocal about his support for interest rate increases.
US Treasury yields continue to trend lower. The 10-year Treasury note yield has dropped fifty points from the beginning of the month, falling as low as 2.50 percent. On the short-end of the yield curve, rates have also fallen lower. The 90-day Treasury Bill is currently yielding 0.16 percent and the one-year T-Bill is yielding 0.25 percent. The decline in Treasury yields should help government bond funds have another good month, although many analysts warn that higher interest rates could eventually erode the returns of mutual funds heavily invested in government bonds. Americans with home equity loans and credit cards that are indexed to Treasury yield averages should see better rates this week. The number of mortgage refinancings should also remain strong. The question still remains for savers: When will rates finally increase on online savings accounts? Unfortunately, it may be until well into 2011 until the best CD rates once again approach the 4 percent to 5 percent range. Check MoneyRates.com daily for the latest interest rate news and forecasts.
Foreign Prime Rates
|
Canada
|
2.75%
|
|
Japan
|
1.48%
|
|
Germany
|
1.00%
|
|
Switzerland
|
0.56%
|
|
Britain
|
0.50%
|
|
Hong Kong
|
5.25%
|
|
Australia
|
4.50%
|
Central Bank Rates
|
China
|
5.31%
|
|
Hong Kong
|
0.50%
|
|
India
|
5.00%
|
|
Japan
|
0.10%
|
|
Australia
|
4.50%
|
|
European Monetary Union
|
1.00%
|
|
Switzerland
|
0.25%
|
|
Canada
|
0.75%
|
|
United Kingdom
|
0.50%
|
|
United States
|
0.00% - 0.25%
|
|
Brazil
|
9.50%
|
Global Interest Rate Report
The news from central banks across the globe has been relatively quiet this month. Iceland's central bank moved the country's benchmark lending rate down a point from 8 percent to 7 percent. The seven-day collateralized lending rate was as high as 18% after Iceland's banking system collapsed in 2008. The Reserve Bank of New Zealand was the last major central bank to make a move when they increased their cash rate from 2.75 percent to 3.00 percent last month. The economy in New Zealand remains subdued, but unlike the Federal Reserve Bank in the U.S., the Reserve Bank of New Zealand is raising rates into economic weakness as a precaution against inflation. Earlier this summer, the Bank of Canada increased the benchmark lending rate in Canada to 0.75 percent. The rate increase was largely due to a growing economy in Canada and the threat of inflation. The economy in Canada has weathered the financial storm better than many of the nation-states across the Atlantic. The European Central Bank has kept their benchmark rate unchanged, following the path set earlier this month by the Bank of England who kept the benchmark lending rate in the UK set at 0.5 percent. Inflation in both Europe and England is higher than the price inflation recorded recently in the United States, making the decisions of central bankers in Europe more difficult than their counterparts in the U.S. The most recent report from England pegged the inflation rate at 3.4 percent much higher than the 2 percent target rate set by the Bank of England. Concerns about economic growth continue to weigh heavy enough on monetary officials to persuade them to keep rates at historic lows despite the risks of inflation.
The Bank of Japan is poised to keep their benchmark interest rate at 0.1 percent, but is facing increasing pressure to take more action to encourage lending and support the Yen. Companies in Japan can have their profitability decrease when the Yen appreciates against major currencies. The central bank in Russia also kept interest rates unchanged at a meeting last month, ending a long period of consecutive interest rate decreases. The improving economy in Russia, coupled with growing price inflation, prompted the Bank of Rossii to keep the benchmark Russian refinancing rate at 7.75 percent and keep their repurchase rate at 6.75 percent. Acceptable levels of inflation in Russia have traditionally been higher than the inflation rate found in many major economies because the Russians have traditionally struggled with foreign investment and economic stability.
Last Updated: 8/31/2010
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