how does the prime rate affect borrowers 
the prime rate is not fixed and can change over time based on changes in the federal funds rate inflation the demand for loans and other economic factors when the prime rate changes the interest rates on loans and financial products that are based on the prime rate may also change the prime rate can affect you in different ways depending on the type of loan or financial product you have here are some of the most common ways history of the prime ratethe prime rate dates back to the 1930s when banks first used it to set interest rates for short term lending to their most creditworthy customers following the great depression in the decades following world war ii the prime rate remained relatively stable hovering around 2 to 3 7the prime rate began to rise significantly in the 1970s as the united states experienced an economic recession and high inflation the prime rate reached its all time high of 21 5 in dec 1980 as the federal reserve sought to curb inflation by raising interest rates 7over the next few decades the prime rate fluctuated widely reflecting the ups and downs of the economy and largely mirroring other benchmark interest rates during times of economic growth the prime rate tends to be higher while it tends to be lower during times of recession or financial turmoil 