The quantitative easing policy (QE3) was designed by the Federal Reserve to help stimulate the current state of the economy. Every month the federal government is purchasing $40 billion in securities or bonds based upon mortgages. The goal of the QE3 is to use bonds and securities to improve the financial strength of banks by expanding the supply of funds. Changes or an adjustment to the central bank has a significant effect on other financial markets.Therippling effects of the declined economy and high unemployment rate has forced consumers to become very conservative with their purchases and spending habits. The economic down turn forced banks and lenders to limit the amount of loan approvals, tighten the application approval criteria, require good credit ratings to gain approval on loan products, and keep credit limits lower than average. This demonstrates how serious the financial crisis became because consumers and lenders both perceived the need to adopt stringent borrowing and lending criteria. The decline in the financial marketplace and the rising unemployment rate led many families to leave their homes through foreclosure, bankruptcy, and simply not being able to afford the mortgage payment anymore. Clearly the struggling economy influenced the decision-making processes of both sides of the financial equation. The supply and demand sources experienced considerable suspicion enough toprompt them to optimize their financial position.
Now that we havewitnessed the effects of the economic downturn and understand how the federal government has attempted toboost the economy, additional questions surface. Lenders and borrowers are curious how the QE3 influences mortgage and credit card rates. The mortgage industry had experienced lower interest rates andthe QE3 is anticipated to encourage rates as low as 1.75% according to Forbes. Lower interest rates make home ownership possible with more affordable monthly mortgage payments. Thisgenerates a significant interest in entertaining the idea of selling your home and buying a new home.The real estate industry benefits substantially by decreasing the number of homes for sale sitting stagnant.The banks benefited from the QE3 and are now actively engaged in refinancing mortgages into lower interest loans. Customers clearly have numerousviable options to achieve a much better mortgage interest rate and canmanage their finances more effectively. The only loophole in this scenario is the individual credit rating of the prospective borrowers. If the tough financial times resulted in borrowers being afflicted by unprecedented job loss, maxing out credit cards, and exhaustinga savings account, they may not get approved for a low interest mortgage loan. Although the concept of QE3 is optimal in theory, there arelarge numbers of people unable to reap the benefits.
The QE3 performed wonders in the mortgage industry; however, the credit card industry failed to achieve success in lowering interest rates. People cannot help but ask what does the QE3 mean for rates from mortgages to credit cards. Most credit cards are accompanied by variable rate interest and tends to be very expensive. Credit card companies are not keen on the idea of lowering the interest rate because theymake a substantial amount of money based upon the interest and principal. The credit card industry is a business that thrives onpeople whofall into the trap of instant gratification. Customers that overuse credit cards have potential to exceed their credit limit resulting in additional fees. Interest rates are now as high as 29.99% even for customers with a good credit rating. Credit card interest rates arevery high and this has forced many credit card holders to minimize the frequency of using the card. The QE3 had no positive effect on the credit card industry and customers have learned that paying with cash is the best option for purchases as opposed to cash. The credit card industry has been very successful in luring in their customers with attractive rewards programs, discounts on hotel and airfare, and cash back rewards. Many people find it interesting how the QE3 had such a dramatic impact on the mortgage industry but failed poorly with the credit card industry.