1 Thought on If you were considering buying a new home, would you want the prime rate to be high or low? why?
  1. Reply
    Paul in San Diego
    February 17, 2014 at 10:30 am

    Generally speaking, the lower the interest rates are the better.

    However, changes in the prime rate don’t really affect the prices of mortgages on a short-term basis. Mortgages are usually tied to some other index (US Treasury bills, LIBOR, etc.) than the prime rate. The prime rate is the interest on short-term overnight loans that businesses make to each other in their daily operations.

    Some second mortgages, like a home equity line of credit, may be tied to the prime rate (prime plus some margin). So, if you needed to take out a second to buy the property, you would want a lower prime rate.

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