The prime interest rate at most major banks is now 8.5 percent, the lowest it has been in more than three years. That's good news for smart borrowers but not so good for young families trying to save money for a house.

Here's what the lower prime rate will mean:- If you have a home equity loan with an interest rate pegged to the prime, your monthly interest costs will be lower. Many home equity lines now have a variable rate 1.5 percentage points above the prime, which until recently would have meant a 10.5 percent interest rate on the home equity loan. That rate now will fall to 10 percent. If you are paying simple interest on a $50,000 loan, the reduction from 10.5 percent to 10 percent would reduce your interest payments from $437 to $416 a month.

- The same thing will happen if you have a credit card with an interest rate linked to the prime. A card with a rate of prime plus 6 percentage points will now carry an interest rate of 14.5 percent, down from 15 percent.

- If you're thinking about getting a home equity loan, keep in mind that the current low rates are likely to rise in coming years and your monthly payments could increase substantially. For example, the prime rate was 11.5 percent in early 1989, which would put interest rates on many home equity loans at 13 percent. Simple interest on a $50,000 home equity loan at 13 percent interest would be $541 a month, compared with $416 at 10 percent interest.

The prime is a short-term rate and has no effect on long-term fixed-rate mortgage rates, which are still in the 9.5 percent interest range. But adjustable rate mortgages may fall slightly in response to lower interest on other short-term rates.

"ARMs are already at historic lows," said Keith Gum-binger of HSH Associates, a mortgage information service in Butler, N.J. "One-year adjustables are at the lowest rate ever. Right now we've averaging 7.33 percent nationally."

Gumbinger said ARMs might fall by a quarter percentage point, which would put them at about 7 percent. But with fixed-rate mortgages under 10 percent, few homebuyers - less than 20 percent - are getting ARMs these days.If you already have an adjustable rate mortgage linked to the one-year Treasury rate and are coming up for a rate adjustment, you'll be in good shape. One-year Treasuries were at 6.26 percent last week, which would put your ARM rate at about 9 percent if your margin is a typical 2 3/4. Those with ARMs tied to the 11th District Cost of Funds won't see any reductions in rates for two to three months, however, because that index moves very slowly.

The lower interest rates are bad news for young families trying to save money to buy a house.

Bank Rate Monitor, which tracks rates at leading banks and thrifts in major cities, found the average rate on one-year certificates of deposit on May 1 was a tiny 6.16 percent.

Publisher Robert Heady said that a half-point cut in the prime rate is likely to be followed by reductions of a quarter to a third of a point in the rates banks pay on certificates of deposit. That would put rates for one-year CDs below 6 percent.

After you take into account inflation of about 4 percent, and taxes on the interest you earn, a CD paying less than 6 percent is a losing proposition for most people.

Heady said the difference between what banks pay savers and what they charge borrowers is "the widest gap we've seen in nine years."

Over the last two years, he said, consumers have lost 3 1/4 percentage points in yield on short-term certificates of deposit and 2 percentage points on longer-term CDs. At the same time, interest on credit cards is up an average of eight-tenths of a point and interest on unsecured personal loans has risen by a quarter point. The cost of auto loans has fallen two-thirds of a point.

"This is a massive squeeze on the consumer," Heady said.