The New York Times reports:

“The Fed said in a statement that, because of weakening economic activity, it had cut the Federal funds target rate by half a percentage point, to 1.5 percent. It also cut its discount rate by the same amount. The vote was unanimous…

Federal Reserve officials said Wednesday’s action was the first time ever that the Fed had coordinated a reduction in interest rates with other central banks, though the United States has periodically joined with other countries to intervene in currency markets to stabilize foreign exchange rates.”

Major banks including National City, Wells Fargo, and Wachovia followed suit by lowering their prime lending rates to 4.5%. The prime rate is the rate that is given to the most credit worthy borrowers.

For more information on how this may affect you see: Will Federal Rate Cuts Affect Your HELOC APR?

A federal rate cut would have resulted in lower interest rates on most home equity lines of credit. Almost all U.S.-based HELOC rates are tied to the Prime Rate which, in turn, is pegged to the Federal Funds Rate. Generally, the Prime Rate is 3 percentage points above the Federal Funds Rate.

Current HELOC borrowers would have loved the extra relief. However, the Prime Rate is already at a relatively low 5%. Compare that to 20.35% in December of 1980 and 8.03% in September of last year.

For a more thorough explanation of HELOC rates and indexes see: Will Federal Rate Cuts Affect Your HELOC APR?

You may also be interested in the Federal Reserve’s list of historic Prime Rates.

Here are a few HELOC deals out there right now, as discovered by TheStreet.com:

• In Abilene, Texas, Bank of America is offering a rate of 4.99% on lines of credit between $100,000 and $300,000 (up to 80% LTV) with no annual fee.

• In Bradenton, Fla., GTE Federal Credit Union is offering a rate of 4.00% on lines of credit between $5,000 and $250,000 (up to 80% LTV) with no annual fee.

• In Garfield Heights, Ohio, Ohio Catholic Federal Credit Union is offering a rate of 3.74% on lines of credit between $5,000 and $50,000 (up to 80% LTV) with no annual fee.

Check with your local lenders – you may be surprised at what you can find.

See Also:

How Federal Rate Cuts Affect Your APR

How to Qualify for a HELOC 

Some analysts speculate that this latest cut will be the last for some time. The federal funds rate is already very low and further decreases could escalate inflation.

The official statement from the Federal Reserve seems to indicate that they will proceed with caution in regard to additional cuts:

“Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.”

The benefit for current HELOC borrowers may not be immediate. To learn more about how these rate cuts may affect you see: Will Federal Rate Cuts Affect Your HELOC APR?