Hold on to Your Hats: Fed Cuts Rate by .75%

Well...this is one way to jump start a short week! Investment news from around the world was bad while we were on vacation Monday. And things got harrier when we returned to work today.

The Federal Reserve board announced an emergency rate drop this morning, the largest single cut in rates since 1982. The new overnight lending rate is now 3.50%, back to 2005 lows. The stock market today opened with a  huge 460-point drop but appears to be recovering a bit with news of the Fed's announcement. In a survey we ran last week, 64% of CreditBloggers.com readers supported a rate cut.

Let's talk about what this dramatic rate cut could mean to you:

• Credit Card Rates - Your credit card APR's could be dropping back down to those lows you enjoyed a couple years ago. Although, the recent trend of lower credit limits, higher fees and stricter underwriting rules will likely still remain.
• Home Equity Loan & Auto Loan Rates - Both of these loan types are keyed off the Fed Rate and should drop pretty quickly. If you got an auto loan with a very high rate this year, you might want to consider refinancing.
• Home Loan Rates - Mortgage rates aren't necessarily tied to the Fed Rate but do tend to follow big changes. Desperate mortgage brokers abound offering good refinance deals. Many have also offered programs where they'll refinance you again with no closing costs if rates drop even lower. If you haven't locked in a low rate FRM, now may be the time.
• Savings Rates - Your high-yield savings account should be taking another APY hit. Look for your savings rates to drop below the 4-5% range.
• Housing Market - It's too early to tell how the Fed's rate cut will help with the mortgage crisis. Many are saying it is too little, too late. Foreclosure rates will likely continue to increase. But lower Fed Rates could mean that banks will start lending and it will easier for new buyers with good credit to snatch up some of those properties on the market. Subprime borrowers are still going to have trouble finding loans.
• Stock Market - The Fed Rate cut is a move designed to increase market stability. Although, some see the move as a warning sign that the economy is getting into deep trouble. More up and down days are likely ahead as we weather the storm.

What do you think about today's news? Share your feedback in the comments section below.

Emily Davidson – Credit.com credit expert and former TransUnion insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.