BLAIR, NEBRASKA (2024 December 9, Monday)
Don Harrold, Writer / Editor
blairtoday@mail.com – Facebook
As the Federal Reserve continues its cycle of interest rate adjustments, the effects on borrowers across the country are profound. For residents and businesses in Blair, Nebraska, understanding these changes can help inform financial decisions. Local insights from Dan Walker, Executive Vice President and Chief Lending Officer at Lincoln Federal Savings Bank (Member FDIC / Equal Housing Lender), combined with national perspectives, highlight how shifting rates are shaping lending trends and what borrowers should consider.
The Federal Reserve’s interest rate decisions have ripple effects across all lending sectors, though the extent of their impact varies by loan type. Dan Walker explains:
“In general, Federal Reserve actions regarding rates do affect consumer, commercial, and mortgage loan rates. There is a stronger relationship with Fed changes and consumer loans and commercial loans than with mortgage loan rates. Typically, consumer and commercial loan rates are tied to indexes with shorter durations such as the Prime Rate, while the mortgage loan rates are influenced more by longer duration indexes such as the 10-year Treasury,” Walker says.
This local perspective aligns with broader observations from Greg McBride, Chief Financial Analyst at Bankrate.com, who notes:
“The Federal Reserve’s rate cuts primarily influence short-term rates like credit cards and HELOCs. Longer-term mortgage rates respond more to bond market movements and broader economic trends,” McBride explained in a recent interview with CNBC.
Walker also emphasizes the complexity of local lending adjustments:
“Because what actions the Federal Reserve takes on rates does have an impact on the cost of lending at the local level, whatever direction the Fed takes could have an impact on what local banks are charging. It is important for consumers to understand that because the Fed lowers the Fed Funds rate by a quarter percent does not always result in local banks lowering rates by the same amount due to the indirect relationship and local market factors.”
For Blair residents weighing home equity loan options, the current rate environment presents unique considerations. With the expectation of rates trending lower, more borrowers are opting for variable-rate products or delaying borrowing decisions. Walker highlights this shift:
“Over the previous couple of years when rates were trending higher, more borrowers were looking for longer rate commitments. Recently, with the expectation of rates trending lower, we are seeing more consumers wait for lower rates or are opting for a variable-rate loan.”
However, experts caution against basing decisions solely on rate forecasts. Shelly Antoniewicz, Chief Economist at the Investment Company Institute, stresses the unpredictability of future rate movements:
“No one can predict what interest rates will do in the future; there are too many uncontrollable factors. Borrowers need to focus on their immediate financial needs and not chase rates,” she told Mortgage Professional America.
Walker echoes this sentiment, advising borrowers to consider the limited impact of small rate changes on monthly payments:
“For example, on a $50,000 loan, a half-percent change in rate is only about $20 a month different. Consumers should consider their individual needs and consult with their banker or financial planner before making a decision about when or how much to borrow and also whether a fixed or variable rate loan is your best option.”
Commercial real estate investors face unique challenges as high property values and rising interest rates strain cash flows. Walker describes the environment in Blair:
“Prior to the recent Fed Fund rate increases, rates were at historic and unprecedented lows, which were kept low in part due to the effects of COVID. As we return to a more normal rate environment, we’re seeing our borrowers who are wanting to purchase real estate investment properties feel the effects of very high property values, due in large part to the low rate environment, raising interest rates, and the inability to raise rents.”
This mirrors national trends. According to Lawrence Yun, Chief Economist at the National Association of Realtors:
“The commercial market has softened due to higher interest rates, though opportunities still exist for well-capitalized investors. The key is finding properties with strong long-term potential,” Yun said in a recent press release.
Walker acknowledges these challenges but emphasizes the value of tailored solutions:
“This scenario has caused investors to have to pay more for the property, borrow more from the bank at a higher rate, which ultimately causes a lower cash flow from the property. While there are still plenty of good opportunities to purchase investment real estate, they are becoming harder to find.”
Dan Walker concludes:
“Lincoln Federal has a number of professional mortgage, commercial, and consumer loan originators who would be happy to discuss current rates and your particular situation to determine what options make the most sense for you.”
