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February 4 - 17, 2022
wilmingtonbiz.com
Greater Wilmington Business Journal
| BANKING & FINANCE |
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Markets prep for fed rate hikes
ederal Reserve Chairman Jerome Powell’s much-anticipated announcement Jan. 26 about the Fed’s intention to raise interest rates in 2022 rippled through the credit world. Observers opined on whether the news would inspire a rush of applications for mortgage and small business loans. As of Jan. 27, mortgage rates were already at a pandemic-era high, with the benchmark rate for the 30-year fixed-rate mortJENNY gage averaging 3.56%, MarketWatch stated in a news report. That was a rise of half a percent in four weeks. The Cape Fear area could see more people hurrying to buy or sell homes, but there’s limited supply for buyers, said Ea Ruth, president of Cape Fear Realtors.
CALLISON
“Buyers that are sitting on the fence and new entry buyers may try to take advantage of the current rates in anticipation of other rate hikes anticipated for this year,” she said. “It is a Catch-22 as we still have limited inventory, which can be a hindrance to those buyers wanting to be at the lower rate. Ruth “This anticipation may also encourage sellers to list if they too have been waiting so that they can capture these buyers getting in on the current rates,” she continued. “Sellers and buyers – unless they are investors – tend to be in the market when they have a need to buy or sell, so I don’t foresee a huge reduction in buyers buying because of the interest rates’ projected increase this year.” In a report Jan. 26, MarketWatch noted that the Fed’s upcoming rate hike has already been “baked into”
mortgage rates. “The Fed manipulates short-term interest rates, while mortgage rates are long term. Consequently, expectations of the Fed’s actions are already being factored into the rates lenders offer applicants,” the report stated. MarketWatch analysts think there will be increased demand for mortgage loans at current rates. “Economists expect that the rise in mortgage rates in recent weeks has already triggered an unseasonable rush to purchase homes well ahead of the typical peak spring home-buying season,” the report continued. “These buyers are aiming to lock in cheap financing while they still can. Real estate experts believe that mortgage rates will continue to rise throughout the year.” Cape Fear Realtors’ Ruth pointed to an upcoming rule from the Federal National Mortgage Association that could have an impact on some homebuyers, including in the region. “Fannie Mae announced Jan. 5, 2022, that it is evaluating and
making adjustments to its loan level for second homes and high balance loans, which basically means it will cost a buyer more to finance a second home or higher-priced home than previously,” she said. “This does not include first-time homebuyers.” The new rule, which has not been broadly publicized, becomes effective April 1. Ruth believes it could affect buyers in coastal communities that attract high numbers of second home buyers and whose properties carry a heftier price tag. What is the nation’s top SBA lender expecting from prospective small business borrowers? “We have not seen accelerating plans to borrow in the face of rate hikes,” said Live Oak Bank’s chief credit officer Steve Smits. “We will, Smits however, see more demand for fixed rather than floating rates. Govern-
