The Fed's Cut Won't Save Struggling Homeowners

It generally takes at least one billing cycle for banks to make the adjustment. So if your billing cycle closed Monday, you're out of luck. On the other hand, if you're in the market for a brand new line of credit, the Fed's move could be reflected in offered rates as soon as Wednesday.

The average interest rate on a $30,000 home equity line of credit is currently 7.79%, up slightly from 7.78% last week, according to Bankrate.com.

Homeowners with adjustable-rate mortgages that are about to reset will also get something of a break. "The good news here is that one-year Treasury yields, which are a common index for adjustable-rate loans, have come down notably over the last month," says Greg McBride, senior financial analyst at Bankrate.com. "So that reset, while still a big deal, will be less painful."

Unfortunately, if your mortgage rate has already reset, even a 50-basis point in prevailing rates probably won't mean the difference between staying in your home or losing it.

Most people who have already been hit with a reset have either figured out a way to refinance out of their loan, figured out how to make the higher payments, or have fallen behind on their payments. And if you are already behind on your payments, the rate cut is not going to help, McBride says.

The Fed's move will eventually affect other kinds of consumer debt, too. It generally takes up to three months for interest rates on credit cards to track short-term rates, and it's typically just the borrowers with the best credit who see the most benefit. In other words, the people most in need of a break on what is probably their most expensive debt won't get it.

Auto loans, although fixed-rate, are also generally tied to the prime rates. So the Fed's move is an added bonus if you're in the market for a new car. Automakers, hit by declining sales, are already falling over themselves to offer incentives.

The average interest rate on a 48-month new car loan is 6.92%, unchanged from last week, according to Bankrate.com.

Of course, the flip side of lower short-term interest rates is that consumers will earn less interest on their savings accounts, certificates of deposit and money market accounts. Yields on CDs generally move in line with Treasury securities of similar maturities, since they compete for consumer's dollars. And just like long-term Treasuries, yields on T-bills had already moved lower in advance of the Fed's rate cut on the back of safe-haven buying.

However, competition also plays a big role in savings rates because banks depend on deposits as an inexpensive source of funds. That's particularly true now that the housing crunch has made it harder for banks to fund mortgages and other kinds of loans by selling them to investors. This competition keep CD rates from falling too fast in a declining rate environment.

The average interest rate on a one-year CD is currently 4.79%, down from 4.83% last week, according to Bankrate.com.

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