With the Federal Reserve expected to lower interest rates again Tuesday, experts say it's time to consider buying or refinancing a home — and paying off those credit cards.

        Analysts expect the Fed to reduce rates by half of a percentage point, with a chance for a three-quarter-point reduction.

        But don't get greedy, those experts warn. Borrowers should not fall into the trap of anticipating that rates will keep falling because no one can predict the Fed's next move after Tuesday, they say.

        How consumers navigate the financial world has be come trickier in the past two years. As economic growth began overheating in 1999-00, the Fed raised rates six times between June 1999 and May 2000 to cool the threat of inflation. It succeeded so well that in January, it was forced to start cutting rates to keep the economy from falling into recession.

        Borrowers have been among the few winners in the slowing economy.

        For instance, the average rate on a 30-year, fixed-rate mortgage fell sharply in November and December as the economy slowed and it became apparent that the Fed would cut rates, said Greg McBride of Bankrate.com, an online research firm that tracks interest rates.

        But Mr. McBride said mortgage rates hit a low of 7.01 percent in January and haven't dropped since. He said those rates likely would drop further if the economy weakened appreciably, but that likely won't happen as the Fed — which reduced key interest rates twice by a half-point in January — continues to lower rates.

        “Locking in a low rate now, and the tangible savings that brings, may be more prudent than gambling on still lower rates that may not come,” Mr. McBride said.

        Indeed, the current average rate for a 30-year, fixed-rate $100,000 mortgage is 7.17 percent. That translates to a monthly payment of $676.83 — a savings of $106.30 versus 8.70 percent in May, the highest level in four years, according to the Cincinnati Area Board of Realtors. Even if the rate fell another quarter of a percentage point, that would mean just $16.90 in monthly savings.

        It might not be worth the gamble.

        The falling rates prompted Sue Poulin of North College Hill to refinance $42,000 on her 30-year, fixed-rate loan with a 8.625 percent rate. By switching to a 15-year, fixed-rate mortgage with a 6.75 percent rate, Ms. Poulin reduced her interest expense by about $80,000 for the life of the loan and will pay off the note twice as fast while increasing her monthly payment just $2.

        “I'm glad I locked when I did as it worked out better than I could have ever expected,” said Ms. Poulin, a 46-year-old bookkeeper for a Cincinnati company. She advised borrowers to shop carefully for a lender, watching out for such things as hidden fees.

Card rates lower, too

        The declining rates also could means billions of dollars in savings for credit card users, said Robert McKinley, president of Card.Web.com Inc., a credit card consulting firm.

        He said the Fed action has meant lower rates for existing card holders with variable rate cards and also lower rates being offered to new customers.

        Mr. McKinley said that with a 1 percentage point drop in the prime rate thus far this year, credit card rates have dropped from 17.11 percent to 16.48 percent. That means savings of about $4 billion in interest charges in the next 12 months, or about $38 a year a household. He said another half-point cut would mean another $19 in annual savings.

        He suggested that consumers take advantage of the falling interest rates and avoid credit cards with fixed rates. Mr. McKinley said variable-rate cards should adjust to lower rates in coming months.

        “Given the crummy stock market, consumers should pay off balances and essentially pay themselves a 15 percent return or better by getting rid of credit card interest charges,” Mr. McKinley said.

        Credit cards are among consumer loans tied to the prime rate, which moves in step with the Fed's rate moves. The prime rate is what banks charge their most credit-worthy customers. It affects rates on such things as short-term car loans, adjustable-rate mortgages, home home-equity loans, credit cards and certificates of deposit.

Savers making less

        The significant monthly savings that are reaped on larger loans such as mortgages don't occur as readily on small loans, such as new-car loans. Still, those rates have been declining slightly since August.

        The big losers in a falling-rate environment are savers, particularly those who invest in certificates of deposit.

        Mr. McBride said investing $100,000 in a one-year CD will produce $1,200 less in interest now than it would have six months ago. He said interest earned on an average one-year, $100,000 CD totaled $5,670 when the yield hit a two-year peak of 5.67 percent in September. In comparison, that same CD has an average yield of about 4.47 percent today, earning $4,470.

        “The outlook is that yields will continue declining, particularly as the Fed continues to cut interest rates,” Mr. McBride said.

        That would suggest that CD buyers might want to act soon.

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