Rate cut… again

Well that means that now that the interest rate has been cut another quarter of a percent, interest rates for savings accounts may decrease a little. Although in order to entice people to save more money the rates may stay the same. Especially since personal savings accounts are at an all time low.

What will this mean for us is that a housing recession will make a difference in our spending. If you are saving for a house and do not have one that is contingent on you selling an existing property then you will be able to find a great deal. For those who are paying a mortgage if you owe more than your house is worth you probably do not want to pay for an albatross around your neck. If your house is worth more than you paid for it even in the current market you would be more likely to hold on to your investment.

Jackie Castleberry won’t be playing Santa Claus this year.

The interest rate on her four-bedroom home loan shot up in October and she is $6,000 behind on her payments. She now owes $168,000 on her home, which once was worth $220,000 but is now worth about $150,000.

In the past, when times were tough, she would borrow against her home’s equity — that’s no longer possible.

“I was always seen as the person that’s giving, but it’s kind of affected this year,” said Castleberry, a former casino buffet supervisor who now makes $11 an hour, 30 hours a week, supervising children before and after school. “This year, I can’t see anything right now as far as gifts.”

If the interest rates for loans such as mortgages and other forms of credit decrease that means that people can also borrow more which is good in some ways but bad if people are not adequately confronting their debt. Christmastime is difficult for people who do not budget and have adequate savings to fund the Christmas they want. So instead of paring down, people will spend more. A drop in interest rates affects many things such as our comfort that the money we have will be adequate for our needs.

Home equity loans which seemed tempting to some are coming back to haunt them with a vengeance. Having some sort of savings makes a difference when times get tough such as a job loss. Using your home as a piggybank, which is what thousands of people have done has contributed to the housing crisis.

Having enough is based on personal comfort levels and spending levels. One person who earns 100,000 a year may have a different comfort level than a person who earns 25,000 but either way both earners need to save. It is easier to save and live below your means if you make more money than it is if you make less but you can still omit things in order to make little lasting changes.