Consumers may not know what the &uot;funds rate&uot; is and exactly how the Federal Reserve determines to cut it, but they will know this: Financing big-ticket items such as cars and houses will be cheaper.

&uot;The theory behind a rate cut is to stimulate the economy,&uot; said Adrian Sandel, city president of AmSouth Bank. &uot;It’s to get individuals to borrow money to buy houses, to buy cars. By doing that, that gets the money into the cycle.&uot;

The Fed cut the federal funds rate a quarter point to 1 point, the lowest it’s been in 45 years.

Sandel noted that house sales and mortgage refinancings are up since the Federal Reserve began an aggressive rate cutting campaign to aid the struggling economy.

Pat Biglane of Concordia Bank & Trust said he expects to see additional refinancings because of the rate cut.

He acknowledged that such a low rate, though, would be an issue for investors.

But Biglane said the Federal Reserve is &uot;keeping an eye on it.&uot;

&uot;They’re trying to spur the economy by encouraging people to borrow funds,&uot; Biglane said.

But how does that work?

For example, Sandel said, if a family refinances a house at the lower rate, the family is paying a lower mortgage bill every month &045; with the same income.

&uot;Now they have more discretionary income,&uot; Sandel said. &uot;That money gets into the economy at the local level&uot; when people use it to buy goods and services.