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Entries in Interest Rates (19)

Wednesday
Sep052012

Zero APR Credit Cards Make Comeback

Comstock/Thinkstock(NEW YORK) -- Credit card issuers are again offering an incentive that had all but disappeared during the recession: Introductory interest rates as low as zero for new customers, with grace periods that run from six months to 18. And the incentives don't stop there.

Other sweeteners have recently included Titleist golf balls and discounted tickets to NFL games, according to recent surveys of the industry.

When market research company Ipsos examined lenders' direct-mail credit card solicitations, it found that while in 2009 only 40 percent teased customers with a reduced introductory rate, that figure had risen to 80 percent by the first quarter of 2012.

Zero-rates aren't being offered just to people blessed with perfect credit, says Ben Woolsey, director of marketing and consumer research for CreditCards.com, a site that helps consumers comparison-shop card rates, grace periods and incentives.

"The card industry has loosened their criteria," he says. "They were very conservative there for a while.  Now they're starting to explore people with less than perfect credit."

Is it a buyers' market now for credit cards?  Woolsey says yes.

"Consumers are more in the driver's seat now than at any time in several years," he says.

The reasons, he and other experts say, are various. They include issuers' improving financial health. Though loss rates on cards spiked during the recession, they now have declined to "historic lows." Thanks to the Fed's keeping interest rates near zero, issuers' borrowing costs, too, are at historic lows.  

Issuers, says Woolsey, feel confident about the near-term future.

"That's why you see these pretty aggressive campaigns," he says.

An August survey by CreditCards.com of 102 of the most widely held cards found 53 had a teaser rate of some sort. Of those, 49 had a rate of zero, says Woolsey.  Some cards apply the introductory rate only to balances transferred from other cards; others apply it only to new purchases.  But a lot of cards, says Woolsey, apply the rate to both.

During the recession, zero-rate promotions dried up.  Card companies, says Woolsey, suffered steep losses and had to pull back on marketing.  But since late 2010, "They have come roaring back. Now they're at the same levels as prior to the recession," he says.

The same holds true for the length of no-interest periods.  Before the recession, Woolsey says, they were generous -- some up to 24 months.  After the housing bubble burst, the period dropped to six months or disappeared altogether.  

Now, a full year is common, "and we're starting to see longer ones."  The lengthening periods, he says, "are a sign that issuers are feeling more confident about the future and about the credit risk of new account members."

Copyright 2012 ABC News Radio

Thursday
Jul262012

Mortgage Rates Fall Once Again

Digital Vision/Thinkstock(NEW YORK) -- Those incredible shrinking mortgage rates fell once again in the past week to yet another record low of 3.49 percent for a 30-year fixed loan, Freddie Mac reported on Thursday.

The 15-year fixed-rate mortgage fell to 2.8 percent from 2.83 percent the previous week.

“Market concerns over the strength of the economic recovery brought long-term Treasury yields to new lows this week allowing fixed mortgage rates to reach record levels,” Frank Nothaft, vice president and chief economist at Freddie Mac, said in a statement. "The Conference Board Leading Economic Index showed the largest monthly decline in June since September 2011.  Existing home sales fell to 4.36 million homes (annualized) in June and represented the slowest pace since October 2011.  Similarly, new home sales fell in June to their lowest level since January of this year.”

Five-year adjustable rate mortgages (ARMs) are at 2.74 percent and one-year ARMs are at 2.71 percent.

The Federal Reserve has been keeping interest rates near zero in an effort to stimulate the economy and has said the low rates will continue until at least through late 2014.

Rates vary by state and individual credit scores. Bankrate.com has a full listing of local mortgage rates as well as bank deposit rates.

Copyright 2012 ABC News Radio

Monday
Jul022012

Barclays Chairman Resigns Amid Rate-Rigging Allegations

Bruno Vincent/Getty Images(NEW YORK) -- The chairman of Barclays announced on Monday he was stepping down in the wake of allegations that the U.K.-based bank tried to manipulate worldwide interest rates for its own financial gain.

Last week, the world's third largest bank was hit with $453 million in fines by U.S. and British regulators for trying to influence the London Interbank Offered Rate (LIBOR) -- the worldwide benchmark for interest rates -- for a period of years dating back at least until 2005.  

The LIBOR rate is supposed to reflect the rate at which top banks in London lend to each other.  It is used in the U.S. and other nations to set rates for student loans, mortgage rates, credit cards and car loans.

In a statement Monday, Barclays Chairman Marcus Agius said "last week’s events -- evidencing as they do unacceptable standards of behaviour within the bank -- have dealt a devastating blow to Barclays reputation.  As Chairman, I am the ultimate guardian of the bank’s reputation.  Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside."

[CLICK HERE TO READ THE FULL STATEMENT]

He apologized for the allegations, saying he was sorry that "customers, clients, employees and shareholders have been let down," and said that an audit will be launched on the bank's business practices.

Agius will remain in his position at Barclays until a successor is chosen.  The bank's board will begin its search for a new chairman on Monday.

Copyright 2012 ABC News Radio

Wednesday
Jun272012

US, UK Reach Settlement with Barclays over Interest Rate Manipulation

Bruno Vincent/Getty Images(NEW YORK) -- Regulators in the U.S. and U.K. have reached a settlement with Barclays, the world’s third largest bank, over allegations that it tried to manipulate worldwide interest rates for its own financial gain, ABC News has confirmed.

The U.S. Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ) announced on Wednesday that U.K.-based Barclays tried to influence something called the LIBOR rate -- the worldwide benchmark for interest rates -- for a period of years dating back at least until 2005.

The London Interbank Offered Rate is supposed to reflect the rate at which top banks in London lend to each other.  It is used in the U.S. and other nations to set rates for student loans, mortgage rates, credit cards and car loans.

Barclays reached separate settlements with the CFTC, DOJ, and the British agency FSA, the Financial Services Authority in England.  More than $450 million in fines were levied, including $160 million to the DOJ.

[CLICK HERE TO SEE THE CFTC'S LEGAL FILING ON THE CASE]

Emails investigators found shows traders inside Barclays wrongfully contacted the division of the bank that influences interest rates. The wrongful conduct is said to have happened on an almost daily basis at times.

As a part of the settlement, Barclays will be required to cease and desist from further similar activity.

Copyright 2012 ABC News Radio

Wednesday
Jun202012

Fed Keeps Low Interest Rates Through 2014

Chip Somodevilla/Getty Images(WASHINGTON) -- The Federal Reserve will be extending its plan called “Operation Twist,” which was set to expire at the end of the month, until the end of the year.

The Fed’s program sells short-term treasuries and replaces them with purchases of longer-term bonds.

The Fed reiterated that it is hoping to preserve low long-term interest rates through the end of 2014. The currently low interest rates are meant to encourage people and businesses to borrow and spend.

For the average person this is felt most clearly in the mortgage refinancing market.  As mortgage rates plummet to historic lows, people with good credit and enough equity have been refinancing their mortgages at lower rates. This gives them access to more money to spend elsewhere.

This is the least controversial move the Fed could make since it will be selling assets it already has, rather than increasing the size of its balance sheet (printing more money).

The criticism remains though that this Fed policy is helping those who already have money with no help for people with more dire problems. Some would argue that the Fed is doing all it can and the rest is up to the Congress and the president.

The Fed also said it is ready to take further action if needed.

Copyright 2012 ABC News Radio

Wednesday
Jun062012

Low Interest Rates Delay Retirement, Survey Finds

Comstock Images/Thinkstock(NEW YORK) -- Record low rates on savings accounts and CDs are hampering the plans of would-be retirees, according to a survey by Wells Fargo/Gallup.

In its Investor and Retirement Optimism Index survey, one in three investors said low rates will cause them to delay retirement.

“Forty-five percent of non-retired Americans and 34 percent of retirees fear that current low interest rates may cause them to ‘outlive’ their money in retirement,” Wells Fargo said in a statement Wednesday.

Some 26 percent of non-retired people and 19 percent of retirees said low interest rates will cause them to put money in investments they “might have avoided.”  And, one in three investors in the survey said low interest rates are likely to lead to a sharp increase in inflation in the years ahead.

“A year ago, retired investors were three times as optimistic as working Americans and now retirees are less optimistic, which may be attributed to how challenging it is to have any kind of growth in savings.  Our questions on interest rates show the impact low rates are having -- they are challenging for retirement nest eggs, particularly when core inflation rate growth is about 3 percent a year and CD rates are yielding less than 1 percent.  Some people may feel like they’re pushing mud up hill,” said Karen Wimbish, director of Retail Retirement at Wells Fargo.

Rates have fallen to record lows because the Federal Reserve is keeping the discount rate near zero, trying to buoy the economy, which is only slowly recovering from the financial meltdown and mortgage collapse that began in 2007.  Rates on six-month CDs fell to below 1 percent in 2009 and are now at a record low of 0.42 percent.

Copyright 2012 ABC News Radio

Thursday
May312012

Mortgage Rates Plummet to New Records

Digital Vision/Thinkstock(NEW YORK) -- If you can get a new mortgage or refinance an existing one, interest rates have fallen to incredible new lows.

For the first time ever, interest on a 15-year loan has dropped below 3 percent, according to data from Freddie Mac.  The rate is down to 2.97 percent this week from 3.04 percent last week.

The average rate on the 30-year loan also hit a new low, falling to 3.75 percent from last week's 3.78 percent.  The figure is the lowest since long-term mortgages began six decades ago.

If the economy doesn’t fall apart in other ways, these low rates may help the housing market as we are now in buying season.

Copyright 2012 ABC News Radio

Monday
Apr232012

Women Pay More for Credit Cards, Study Finds

George Doyle/Stockbyte/Thinkstock(NEW YORK) -- Women pay more for their credit cards than men do, according to new research.

A FINRA Foundation study found that, on average, women pay a half a point higher interest rate on their cards than men do.  And that's after factoring in things like income level, education and even financial literacy.

The study also found more discouraging news for women.  They were:

-- five percentage points more likely to carry a credit card balance;
-- four percentage points more likely to make only the minimum payment;
-- and six points more likely to be charged a late fee.

However, among financially literate men and women, these last three stats disappeared.  Men and women, instead, were equal.

"For women, having a high level of financial literacy appears to pay off," said FINRA Foundation President Gerri Walsh.  "Becoming more financially literate is a great step that any woman can take to keep more of her hard-earned money in her pocket."

Copyright 2012 ABC News Radio

Thursday
Feb022012

Fed Head Bernanke Lobbies for Low Interest Rates

Alex Wong/Getty Images(WASHINGTON) -- Ben Bernanke, chairman of the Federal Reserve, told Congress on Thursday that although there has been some improvement in the U.S. economy, Congress’ fiscal policy must be placed on a “sustainable path” to keep long-term interest rates low.

He testified before the House of Representatives’ Committee on the Budget, saying fiscal policy should aim to decrease debt relative to national income or at least stabilize it.

“Attaining this goal should be a top priority,” he said in a prepared speech titled “Economic Outlook and the Federal Budget Situation.”

Assuming that most expiring tax provisions are extended, and that Medicare’s physician payment rates hold steady, he said, the budget deficit would be more than 4 percent of GDP in 2017, if the economy is close to full employment then.

The Federal Reserve’s Open Market Committee last week announced it expects to keep the federal funds rate at zero to 1/4 percent at least through 2014, saying the housing sector remained depressed and business investment has slowed. The federal funds rate is the rate at which banks lend to each other overnight.

Rep. Paul Ryan, R-Wis., chairman, and other committee members, warned Bernanke that the Federal Reserve might be reaching beyond its monetary role into fiscal policy.

“Our intention was to provide useful background and in all cases looked at both sides of the issue,” Bernanke said in response to one question about the Fed’s role in budgetary policy. “We recognize and have no doubt it’s Congress that has to make those decisions.”

Ryan also asked whether the Federal Reserve was risking higher inflation by keeping interest rates low. Bernanke said inflation appeared contained at less than 2 percent for the next couple years. If investors lose confidence in the nation, interest rates, including treasury rates are going to go up, Bernanke told Congress.

Bernanke said the Fed was aware of the effect of low interest rates on savers, a question frequently posed to Bernanke because the federal funds rate has remained near zero since 2008.

Investors are closing watching the Federal Reserve for signs of additional stimulus, or a third round of quantitative easing, known as QE3.

Copyright 2012 ABC News Radio

Wednesday
Jan252012

Fed Extends Low Interest Rates Through 2014

Mark Wilson/Getty Images(WASHINGTON) -- The Federal Reserve announced Wednesday that it expects to keep interest rates near zero percent at least through late 2014. The rate has remained at this record low since the financial crisis took hold in 2008.

In a statement on Wednesday, the Federal Reserve’s monetary policy-making group, the Federal Open Market Committee (FOMC), said it is keeping the target range for the federal funds rate at zero to 1/4 percent and said that economic conditions, "are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

The committee said the economy has been, “expanding moderately, notwithstanding some slowing in global growth.”

“While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated,” the committee said in its statement.

Household spending has improved, but growth in business fixed investment has slowed, and the housing sector remains depressed, the committee said.

The weekly average 30-year fixed-rate mortgage (FRM) edged down slightly to 3.88 percent to a new all-time record low marking the seventh consecutive week below 4 percent, Fannie Mae said on Jan. 19.  Last year at this time, the 30-year FRM averaged 4.74 percent. The 15-year fixed-rate mortgage averaged 3.17 percent up from the previous week when it averaged 3.16 percent. A year ago at this time, the 15-year FRM averaged 4.05 percent.

The committee said inflation has been, “subdued in recent months, and longer-term inflation expectations have remained stable.”

The committee finished its two-day meeting on Wednesday, the first meeting of the year. The FOMC, which holds eight regularly scheduled meetings a year, buys and sells securities as its “open market” operations to set monetary policy.

The FOMC consists of twelve members: the seven members of the Board of Governors of the Federal Reserve System, the president of the Federal Reserve Bank of New York, and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.

Copyright 2012 ABC News Radio







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