Prime rate is one of the most publicized indexes in the news media. Prime rate is used as one of the indexes in adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, however the same factors that affect the prime rate also influence the interest rates of mortgage loans. Prime is an interest rate that banks generally charge to their preferred customers.

Recently, the prime rate, which is a short-term interest rate, has been increasing faster than the rates on longer term bonds. As a result, if you have a home equity line, you may want to consider refinancing it into a fixed-rate second which will likely carry a lower rate which will not change with the prime.

The Federal Banking Commission gathers usually 4 times per year, to decide wether they will raise, lower, or maintain the current Prime Rate.

The Prime Rate is generally know as the rate that which banks will charge to lend money not only to their best customers but also to other banks. Many homeowners have become excitied when finding out that a Home Equity Line of Credit is available at the prime rate, thinking they are getting the money for the same rate as the bank's best customers. While that may be true, the fact is that when banks lend money at prime to their best customers it is usually unsecured rather than having to pledge real property as security as in the case of the Home Equity Line of Credit.

 

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