What have the 13 Fed rate cuts meant to the average American family? More than $111,000.

That’s what a typical family with a typical mortgage, credit card balance, car loan, home equity loan and certificate of deposit savings would have saved had they used today’s interest rates for their loans and savings, instead of those in effect in May 2000, when the Fed’s Open Market Committee last raised rates.

At today’s meeting, Alan Greenspan and his fellow members of the rate-setting Federal Open Market Committee left the federal funds rate alone. The FOMC cut rates 25 basis points at the June meeting, the first rate reduction since November, which was the only cut in 2002. The committee met 11 times in 2001 and cut at each meeting.

The result of the 13 cuts has been lower rates on all sorts of products. For consumers who borrow, it has meant they’ve been able to get lower monthly rates. For consumers who save, unfortunately, it has meant lower returns.

To illustrate how the interest-rate moves affect monthly expenses and income for the average American family, we created an imaginary couple, Joe and Jill Bankrate, and gave them some typical debts and savings:

  • A $165,000, 30-year fixed-rate mortgage.
  • A $40,253 home equity loan, payable over 15 years.
  • A credit card balance of $7,023, which they intend to pay off over three years.
  • A $22,000, 48-month new car loan.
  • A $5,000, one-year CD.

We’ve projected their expenses based on national averages, using the latest interest rate information from Bankrate.com’s weekly national rate surveys.

We compared two sets of rates: The rates from May 2000, which is when the Fed stopped its yearlong policy of raising rates to stem inflation, and the Bankrate information from Sept. 12, 2003.

The Bankrates’ mortgage: $165,000
Mortgages, which move in anticipation of rate changes by the Federal Reserve Board, are the biggest part of most families’ finances. So this is where the biggest dollar change has occurred: Rates were 8.65 percent in May 2000; they were 6.22 percent on Sept. 12.

If our Bankrate couple had waited to finance their mortgage or had refinanced their mortgage in the last couple of months, their savings would have been significant.

Total mortgage savings:
$273.57 per month, or
$98,486.25 over the life of the loan.

Click here for the latest mortgage rates from Bankrate.

The Bankrates’ home equity loan: $40,253
Rates have fallen from 10.07 percent in May 2000, to 7.30 percent on Sept. 12.

Total home equity loan savings:
$65 per month, or
$11,826 over the life of the loan.

The savings would have been even greater had the Bankrates taken out a home equity line of credit. But most experts believe that rates are about as low as they will go, making locking-in the fixed-rate home equity loan a wiser choice.

Click here for the latest home equity rates from Bankrate.

The Bankrates’ auto loan: $22,000
Rates have fallen from 9.34 percent in May, 2000, to 7.28 percent on Sept. 12.

Total savings on their car loan would have been
$21.35 per month, or
$1,024.78 over the life of the loan.

Click here for the latest auto loan rates from Bankrate.

The Bankrates’ credit card: $7,026
Joe and Jill’s standard variable rate card dropped 3.01 percent, since the rate cutting began. In May, 2000, the rate was 16.85 percent, and by Sept. 12, it was readjusted down to 13.81 percent. Their monthly savings is
$10.49 or
$427.56 over three years.

A credit card issuer’s rate adjustment generally moves much slower than the Fed changes, since most re-price interest rates after a change in the prime rate. Depending on the policy of your financial institution, it could take several weeks or even months to see a change in rates. Plus, credit cards that have interest-rate “floors” may have already hit their lowest rates.

Click here to find the best credit card rates from Bankrate.com.

The Bankrates’ nest egg: $5,000
Unfortunately, the rate cuts by the Federal Reserve Board have had a dramatically adverse affect on our couple’s savings account. And, the change in the rate was fairly swift.

In May, 2000, their one-year $5,000 certificate of deposit was earning
$277 at a yield of 5.54 percent. Today, that same $5,000 is only earning
$55 — a difference of
$222.

Click here for the latest savings rates locally and nationally from Bankrate.

The rate cuts could have netted the Bankrates a total savings of $111,542.59.


Difference the Fed makes in what the Bankrates pay for loans
 
May

2000

% rate

May

2000 payment

Sept
.

2003

% rate

Sept
.

2003 payment

Difference

Mortgage
($165,000, 30 years, fixed rate)

8.65%
$1,286.29
6.22%
$1,012.72

$273.57 per month
$98,486.25
over the life of the loan

Home equity line of credit
($30,400, paying interest only for 10 years)
9.21%
$233
4.55%
$115
$118 per month
$14,166 over the life of the loan
Home equity loan
($40,253, 15 years)
10.07%
$434
7.30%
$369
$65 per month
$11,826
over the life of the loan
Auto loan
($22,000, 48-month new car loan)
9.34%
$551.03
7.28%
$529.68
$21.35 per month
$1,024.78
over the life of the loan
Credit cards
($7,026 balance, goal of paying it off in three years)
16.85%
$249.97
13.81%
$239.48
$10.49 per month
$427.56 over three years
 
Difference the Fed makes in what the Bankrates earn
 
May

2000

% rate

Annual interest

earned


Sept. 2003

% rate


Annual interest earned
Difference
Certificate of deposit
(1-year CD, $5,000)
5.54%
$277
1.09%
$55
-$222
Sources: Bankrate.com weekly surveys, Consumer Bankers Association