By Dolores Kong
The Boston Globe

Right after the Federal Reserve announced a surprise
half percentage point rate cut on Wednesday, the phone
was ringing off the hook in mortgage lender Brian
Clancy's office, with calls from homeowners looking to

But Clancy, vice president of Monument Mortgage Co. in
Lexington, had to inform the scores of callers that
the Fed move had little impact on the rate for a
30-year fixed mortgage the firm offers. In fact, the
rate temporarily blipped up a bit.

"That 7 1/4 I had yesterday morning went up to 7 . We
actually lost ground yesterday," said Clancy of the
30-year fixed mortgage the firm offers with no points,
no closing costs. "I explained to everybody it didn't
have a positive effect on long-term interest rates."

Since the middle of last year, the average fixed-rate
mortgage has come down more than a point in
anticipation of the Federal Reserve cutting rates in
response to a slowing economy. So the cut already has
been largely factored in, although the timing of it
and the amount of it came as a surprise, according to
industry specialists.

"The market was anticipating a Fed cut, although not
one of this magnitude," said Peter Crane, vice
president and managing editor of iMoneyNet, a
Westborough company that provides online comparisons
of bank and money fund interest rates. Consumers may
not know it, but "they're probably already feeling
it," in such areas as lower mortgage rates and lower
money-market mutual fund rates.

But in other areas, some consumers have yet to
benefit, while others may yet get hurt. Likely to
respond to the cut in the coming weeks or months:
Rates on everything from credit cards to car loans,
certificates of deposit to savings accounts.

In the most immediate reaction to the Fed cutting the
federal funds rate on overnight bank lending to 6
percent - aside from the same-day stock market run-up,
that is - institutions such as FleetBoston Financial
and Bank of America yesterday cut their prime rate
from 9.5 percent to 9 percent. The prime rate is what
commercial banks charge their most credit-worthy

Yesterday, the Fed cut another rate - the less
important discount rate used for direct loans from the
Fed to financially troubled banks - by a quarter
percentage point, to 5.5 percent. The Fed had lowered
the discount rate to 5.75 percent on Wednesday. In a
statement, it said the Fed's board of governors had
voted on yesterday's cut unanimously at the request of
all 12 regional Fed banks.

If economic indicators continue to look grim,
financial institutions may be slow and even reluctant
to reduce rates on credit cards, personal loans, and
car loans in response to the Fed cuts, according to
Karen Christie, vice president of research for Bank-
rate.com, a Florida-based company that allows online
comparisons of interest rates.

"What they look at is, `What is the economy doing? Are
we going to have people who potentially are not going
to be able to make payments?' " said Christie.

But financial institutions, ever mindful of what they
pay out, will probably be quick to cut the interest
they pay on certificates of deposit, Christie said.

"Buy your CDs now, get your fixed mortgage now," she
said. "Wait on credit cards and personal loans."

Christie also suggested that potential homebuyers stay
away from adjustable rate mortgages because the fixed
rates look so attractive. And she advised that
potential new car buyers look for extremely low-
interest loans from dealers who want to move inventory
this time of year, rather than wait for bank car loan
rates to reflect the Fed cut.

Of course, it's anyone's guess what the economic
indicators will next show, or what the Federal Reserve
Board will do on interest rates when it has its
regular meeting at the end of the month, said
iMoneyNet's Crane.

"For consumers, you should pay attention, but don't
base your investment decisions on these moves," said
Crane. "Anyone who says, `Oh, there's a Fed cut, time
to buy stocks' - that's the wrong way to invest. With
investments, savings, debt, and everything else, they
should have a long-term plan."