Interest rate – Bobs Birdhouse http://bobsbirdhouse.com/ Mon, 20 Jun 2022 23:27:37 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://bobsbirdhouse.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Interest rate – Bobs Birdhouse http://bobsbirdhouse.com/ 32 32 What is an interest rate floor? https://bobsbirdhouse.com/what-is-an-interest-rate-floor/ Mon, 20 Jun 2022 23:21:47 +0000 https://bobsbirdhouse.com/what-is-an-interest-rate-floor/ Example of an interest rate floor You now know what a floor rate means. But the concept can be a bit fuzzy until you see an example. The best way to learn about an interest rate floor is to see how this financial detail would work in real life. Let’s take a closer look at […]]]>

Example of an interest rate floor

You now know what a floor rate means. But the concept can be a bit fuzzy until you see an example. The best way to learn about an interest rate floor is to see how this financial detail would work in real life. Let’s take a closer look at two different examples.

ARM Interest Rate Floor

Let’s say you compare rates with different lenders and decide to go with a 5/1 ARM. When you take out a variable rate loan with this structure, the interest rate will remain the same for the first 5 years of your loan. After that, the ARM will adjust your interest rate for the duration of the term.

When you take out the loan, you agree to an interest rate floor of 5%. As you approach the 5-year mark, you discover that interest rates are hovering around 4%. But since you accepted the 5% floor, you will never see your rate drop below 5%.

Ultimately, the interest rate floor means you won’t save as much as you could when interest rates fall. But when accompanied by an interest rate cap, these guarantees can help prevent your mortgage payment from going over budget.

Interest rate floor on loans

Now let’s look at this from the lender’s perspective. As a lender, you structure an ARM with a mortgage customer. The home buyer wants an ARM 5/1.

Based on today’s economic conditions, you might decide that lower rates are a possibility. Since you don’t want to lose money on the loan, you stipulate a floor rate of 5% in the contract. If the benchmark interest rate falls below 5%, you can still charge the customer 5% interest on their loan.

Generally, lenders are very interested in including an interest rate floor. The goal is to protect their investment from losing money if market interest rates drop too much.

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Interest rate hikes in the United States worry Hilaire | Local company https://bobsbirdhouse.com/interest-rate-hikes-in-the-united-states-worry-hilaire-local-company/ Sun, 19 Jun 2022 00:35:00 +0000 https://bobsbirdhouse.com/interest-rate-hikes-in-the-united-states-worry-hilaire-local-company/ ON FRIDAY, the Central Bank will announce whether it will raise the country’s repo rate by 3.5% to address rising inflation in the economy. In March, the interest rate setting body, the Monetary Policy Committee (MPC) opted to keep the repo rate at 3.5, the rate it has been since March 2020. The statement noted […]]]>

ON FRIDAY, the Central Bank will announce whether it will raise the country’s repo rate by 3.5% to address rising inflation in the economy.

In March, the interest rate setting body, the Monetary Policy Committee (MPC) opted to keep the repo rate at 3.5, the rate it has been since March 2020.

The statement noted that while higher energy prices will boost tax revenue, greater supply disruptions and higher food prices will add to imported inflation.

“Consensus among international analysts regarding further interest rate adjustments in the US and elsewhere was also taken into account. At the same time, the Committee took heed of early signs of a domestic economic recovery facilitated by some credit expansion, alongside still relatively low supply-driven inflation. Considering all factors, the MPC agreed to maintain the pension rate at 3.50%. The Central Bank will continue to carefully monitor and analyze international and domestic developments and prospects,” the March statement said.

The International Monetary Fund (IMF) predicted that there would be significant inflationary pressures around the world, with developing economies being the most vulnerable. He had forecast inflation to reach 8.7% for 2022 for developing countries, but revised the inflation projection to 11.5% after Russia invaded Ukraine.

But in recent days, central banks around the world have made adjustments to their interest rates to cope with global inflation.

Last Wednesday, the US Federal Reserve raised benchmark interest rates by 0.75%, the third time for the year so far and the largest since 1994. Switzerland and Britain raised their rate Thursday.

Central banks raise interest rates to curb rising inflation.

In an interview with the Sunday Express, Central Bank Governor Dr Alvin Hilaire said he expects the US Federal Reserve to continue raising interest rates as the price reading May 2022 consumer price index showed an increase of 8.6%, the highest rate of inflation in the world. United States since 1981.

The CBTT pursues a monetary policy focused on promoting low inflation and a stable foreign exchange market.

“The Fed’s decision to raise interest rates, given signs of inflation and a strengthening US economy, is not surprising. However, we are concerned that a rapid and sustained rise in interest rates could lead to a slowdown in the US economy which would have repercussions on the rest of the world. The current volatility in global equity markets reflects such anxiety,” Hilaire said.

He said T&T would likely be affected “given our business and financial ties with the United States and other countries.”

“External borrowing costs will increase. On the other hand, the related increase in energy prices has a positive impact on Trinidad and Tobago’s fiscal and external accounts. Many other Caribbean territories will face both higher foreign financing costs and the need to find more money to pay for imported fuel,” he said.

He noted that T&T has already started to feel the impact of global inflation on several fronts.

“Imported foodstuffs, more expensive gasoline with the drop in the subsidy and supply disruptions which impact the costs of imported construction inputs and other items,” he noted.

Last week, the Confederation of Regional Chambers of Commerce met with Hilaire to discuss, among other things, the negative impacts of global inflation and the currency shortage.

During this meeting, Hilaire noted that the continued shortage of foreign exchange is real and Hilaire pointed out to stakeholders that the Central Bank continues to pump up to US$50 million every two weeks from licensed FX brokers.

Local manufacturers have already experienced shortages of imported materials to produce their wares.

Hilaire said he was open to discussions with EximBank on whether it could extend the currencies to small and medium-sized businesses and not just manufacturers and importers of essential goods.

In a March interview with the Sunday Express, Hilaire said food prices and the cost of living were expected to rise further in the coming months.

“Higher inflation erodes purchasing power, especially of people on fixed incomes, such as pensioners or people on social benefits. Given the current domestic economic situation marked by still relatively sluggish demand, the Bank expects between half and two-thirds of external price increases to be passed on to domestic consumers this year,” he said.

His advice to the public in the coming months?

“Stay informed. The current turmoil in stock markets, swings in energy prices, and fears of a downturn in the United States and elsewhere are nothing new. Information helps understanding and making confident decisions.

“Stay alert. Take the opportunity to review your finances, contracts and commitments to ensure the security of your financial transactions, investments and savings. Our National Financial Literacy Program can help.

“And prioritize more. Where borrowing costs and prices of goods and services are expected to rise, seek out the best deals, expand your earning power, reduce waste and unnecessary spending, and focus your finances on the areas you value most,” did he declare.

Last week, Supermarket Association Chairman Rajiv Diptee said rising food prices were an opportunity for consumers to rethink their diets and change their diets to reduce their grocery bills .

“We have to accept the fact that at some point prices are going to adjust our tastes,” he said.

“We are going to have to change our diet. It’s something we could all look at, in terms of what we choose to consume,” Diptee said.

May Monetary Policy Report

In its monetary policy report last month, the CBTT noted that the global economic recovery is expected to slow in 2022, due to high food and energy prices due to the Russia-Ukraine crisis and food shortages. supply resulting from the Covid-19 pandemic, which have aggravated inflationary pressures in many economies.

“Rising inflation expectations have led to a normalization of policy rates in the United States and elsewhere, raising concerns about a further deceleration in growth over the medium term. Domestically, increased production of crude oil and petrochemicals spearheaded a return to positive growth in energy sector activity in the fourth quarter of 2021,” the report said.

He noted that recent high international energy prices have boosted public finances and external accounts.

“In the very uncertain global context, care must be taken not to consider this ‘windfall’ as permanent and to pursue the structural reforms essential to strengthen the competitiveness of Trinidad and Tobago,” he said.

He noted that the war-related spike in energy and other commodity prices in Ukraine is already impacting real incomes and consumption around the world.

“The war has also led to further supply shortages, especially for wheat, vegetable oils, some metals and electronic components. Meanwhile, there has been enormous volatility in financial markets, with stock prices fluctuating based on news surrounding the war, the projected path of interest rates, and fears that excessive monetary tightening could lead to recessions. At the same time, growing Covid-19 inflections and associated lockdowns in China and elsewhere not only threaten to add to existing supply constraints, but provide a sobering indication that the pandemic has yet to follow. its full course,” he said.

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Stock markets plunge again as wave of interest rate hikes stokes recession fears | Mondial economy https://bobsbirdhouse.com/stock-markets-plunge-again-as-wave-of-interest-rate-hikes-stokes-recession-fears-mondial-economy/ Fri, 17 Jun 2022 04:49:00 +0000 https://bobsbirdhouse.com/stock-markets-plunge-again-as-wave-of-interest-rate-hikes-stokes-recession-fears-mondial-economy/ The global rout of stock markets, cryptocurrencies and other risky assets has accelerated amid growing fears that runaway inflation, rising interest rates and slowing growth will combine to tip the world into recession. Stock prices fell across Asia on Friday at the start of what was expected to be another hot day for investors spooked […]]]>

The global rout of stock markets, cryptocurrencies and other risky assets has accelerated amid growing fears that runaway inflation, rising interest rates and slowing growth will combine to tip the world into recession.

Stock prices fell across Asia on Friday at the start of what was expected to be another hot day for investors spooked by the US Federal Reserve’s decision this week to raise interest rates by the widest margin in nearly 30 year.

Other major central banks such as the Bank of England and the Swiss National Bank followed suit – the latter in its first hike in 15 years – prompting economists to revise their growth forecasts downwards.

Stephen Innes of SPI Asset Management in Hong Kong said: “No central banker worth their salt would put their inflation-fighting skills on the line and import higher energy inflation via a weaker currency.

Although the Bank of Japan announced on Friday that it was sticking to its ultra-loose monetary policy, he added that rate hikes elsewhere were a “very worrying signal for equity investors…the global race to the rate hike is far from over.” line”.

Many believe the United States could be in recession by next year, raising the prospect of a wider global recession.

Stocks in the world’s largest economy had their worst start to the year in 60 years with the benchmark S&P 500 index down 23% since January after losing another 3.25% on Thursday. JP Morgan analysts said the state of the S&P 500 “implies an 85% probability of a US recession”.

The falls – reflected in the Dow Jones average, the Nasdaq and the tech-heavy UK and European markets – did nothing to boost confidence in Asia-Pacific. The Nikkei in Tokyo was down 1.65% and on track for its worst week of losses in two years, as was India’s main Nifty index. In Sydney, the ASX200 was down 2% on Friday afternoon.

The cryptocurrency rout also shows no signs of slowing down with bitcoin down 7.8% and ethereum 8.45% worse. Additionally, the Financial Times reported that Singapore-based crypto hedge fund Three Arrows Capital — which manages $10 billion — failed to meet margin calls this week amid falling crypto stocks.

Compounding the outlook is the likelihood that the conflict in Ukraine will drag on and the West’s economic war on Russia will drive energy prices even higher ahead of winter in the Northern Hemisphere.

“The speed and degree of policy tightening could prove too much for economies to handle, particularly given the commodity price shock currently in play,” economists at Australia’s NAB bank said Friday in a rating. “As a result, the risk of recession for several of the major advanced economies, including the United States, is uncomfortably high.”

David Bassanese, chief economist at Betashares in Sydney, went further and predicted a US recession “within the next 12 months” due to persistent inflation and the Fed’s commitment to hike rates until until the genie of inflation is back in the bottle.

As a result, he said equity markets in the United States fell further. “It looks like there is room for stock markets to continue falling. My base case is that the ultimate peak-to-trough decline for the S&P 500 will be 35%, implying a decline to 3,100 from its closing peak of 4,796 on Jan. 3. It closed at 3,667 points on Thursday.

China’s ongoing coronavirus lockdowns are causing further problems for the global economy. The supply chain upheavals in the world’s second-largest economy that began during the pandemic are set to continue into at least next year thanks to the shutdown of Shanghai and other key regions.

The big picture is that China was already facing problems ranging from decoupling from the west amid geopolitical tensions, a failing and deeply indebted real estate market and uncertainty caused by President Xi Jinping’s crackdown. against big tech companies.

While the West is raising rates, the Chinese central bank has cut them and the government in Beijing has launched more stimulus in the economy. It helped mainland stocks and the Hong Kong market reverse Friday’s trade decline, but may not be enough to bail out the global economy as its massive $4 billion stimulus package did. dollars after the global financial crisis of 2008-09.

The Bank of England’s decision to raise rates by 0.25% on Thursday was criticized by some as too little too late to stop inflation in its tracks. One forecast says prices will rise 11% by October and another report says food price increases could exceed 15% in the fall.

Britain’s economy shrank 0.3% in May, figures showed on Monday, and after falling 0.1% it has ‘raised’ the chances of the economy slipping into recession, according to Paul Dales, chief economist of the consultancy firm Capital Economics.

The euro zone is also drinking badly and is torn by doubts on how to handle the divergent real borrowing costs between different countries, which means that Italy has to pay more than Germany despite having the same currency.

The Economist Intelligence Unit (EIU) says in a report that although the United States rebounded faster than other economies from the pandemic crisis, there were signs that consumer spending was weakening. His basic view is that US growth will stop before a recession, but that could be a close call.

“EIU’s main forecast is that economic growth in the United States will slow sharply during 2022 and 2023, due to stubbornly high inflation, rising interest rates and slowing growth elsewhere” , did he declare.

“We expect consumer demand to be resilient enough to avoid an outright recession, thanks in part to the tight labor market and strong household balance sheets. However, that doesn’t mean a recession is completely out of the picture. about.

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Mortgage demand is now roughly half of what it was a year ago as interest rates rise even more https://bobsbirdhouse.com/mortgage-demand-is-now-roughly-half-of-what-it-was-a-year-ago-as-interest-rates-rise-even-more/ Wed, 15 Jun 2022 11:00:01 +0000 https://bobsbirdhouse.com/mortgage-demand-is-now-roughly-half-of-what-it-was-a-year-ago-as-interest-rates-rise-even-more/ Total mortgage application volume was 52.7% lower last week than the same week a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The sharp rise in interest rates is decimating the volume of refinancing, and these rates, along with exorbitant home prices and a shortage of homes for sale, are hitting demand […]]]>

Total mortgage application volume was 52.7% lower last week than the same week a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The sharp rise in interest rates is decimating the volume of refinancing, and these rates, along with exorbitant home prices and a shortage of homes for sale, are hitting demand from potential buyers.

Last week, the average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell from 5.40% to 5.65%, with points rising from 0.60 to 0.71 (including origination fees) for loans with a 20% down payment. This week they have risen again, with the average rate hitting 6.28% on Tuesday, according to a daily metric from Mortgage News Daily.

“Mortgage rates have tracked Treasury yields in response to higher-than-expected inflation and anticipation that the Federal Reserve will need to raise rates at a faster pace,” said MBA economist Joel Kan.

The weekly volume of mortgage applications rebounded slightly from the previous week, adjusted for the holidays. Refinance demand rose 4% for the week, but was 76% lower than the same week a year ago.

Mortgage applications from homebuyers rose 8% for the week, but were 16% lower than a year ago.

“Despite the rate increase, application activity rebounded after the Memorial Day holiday week, but remained 0.29% below pre-holiday levels,” Kan added.

The housing market is now shaken amid rising interest rates. After two years of record high rates, fueled by the Federal Reserve’s Covid-induced mortgage-backed bond purchases, house prices are overheating and affordability is now at an all-time low. Major real estate brokers, Redfin and Compass, both announced layoffs on Tuesday.

“Mortgage rates have risen faster than at any time in history. We could be facing years, not months, of fewer home sales, and Redfin still expects to thrive. the drop from $97 per share to $8 does not strain a company, I don’t know what’s going on,” Redfin CEO Glenn Kelman wrote on the company’s website.

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Homeowners struggling with rising interest rates https://bobsbirdhouse.com/homeowners-struggling-with-rising-interest-rates/ Mon, 13 Jun 2022 23:02:00 +0000 https://bobsbirdhouse.com/homeowners-struggling-with-rising-interest-rates/ Many residents of Simcoe Muskoka are struggling to cope with the rising cost of living. As gasoline prices hit record highs, the value of groceries rises, and other everyday essentials see an increase – so do interest rates. The Bank of Canada remains on a rate hike path as it attempts to rein in inflation, […]]]>

Many residents of Simcoe Muskoka are struggling to cope with the rising cost of living.

As gasoline prices hit record highs, the value of groceries rises, and other everyday essentials see an increase – so do interest rates.

The Bank of Canada remains on a rate hike path as it attempts to rein in inflation, which is now at its highest level in 31 years at 6.8%.

Two weeks ago, the bank raised its interest rate to 1.5%.

The increase has left some Barrie brokers wondering what the future holds for current and future homeowners who are just paying.

“Over the next three to five years, what you’re going to see are people really starting to struggle when they apply for renewals,” said Mortgage Sense owner and broker Steph Quenneville.

He said rising rates could cause people to file for bankruptcy or, worse still, have their homes foreclosed.

“At renewal, you may not be able to borrow more, so limit your spending in the near future,” Quenneville said from his downtown office.

Amanda Harper has owned her home in Barrie since 2016 before the market started to skyrocket in the county. She said as a mother of five children under the age of nine, she had to be at home looking after them, relying on her husband’s earnings to pay the mortgage.

“Renewing our mortgage at some point is definitely a concern,” Harper said.

The young mother said they were forced to cut back on expenses such as groceries and gas. Harper said her husband now bikes to work to save fuel.

“Do I think we’ll have to sell our house? No. But I think it will make it harder,” she said.

Manulife Bank of Canada recently released a study that found nearly one in four homeowners worried they would have to sell their home if interest rates continue to rise.

The seven-day survey in April found that 18% of landlords surveyed are already struggling to pay for their accommodation.


With files from The Canadian Press

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Madis Müller: Inflation would only accelerate without raising interest rates | Opinion https://bobsbirdhouse.com/madis-muller-inflation-would-only-accelerate-without-raising-interest-rates-opinion/ Sun, 12 Jun 2022 07:08:00 +0000 https://bobsbirdhouse.com/madis-muller-inflation-would-only-accelerate-without-raising-interest-rates-opinion/ The eurozone saw consumer prices rise 8.1% in May, well above the European Central Bank’s long-term target of 2%. High energy prices increasingly translate into higher prices for other products and services. Russia’s aggression in Ukraine has caused a spike in the prices of foodstuffs and other raw materials of which Russia and Ukraine are […]]]>

The eurozone saw consumer prices rise 8.1% in May, well above the European Central Bank’s long-term target of 2%. High energy prices increasingly translate into higher prices for other products and services.

Russia’s aggression in Ukraine has caused a spike in the prices of foodstuffs and other raw materials of which Russia and Ukraine are the main suppliers. The effects of war and sanctions are further exacerbated by China’s coronavirus restrictions. It is increasingly clear that we have reason to speak of more permanent upward pressure on prices, a situation in which the central bank must intervene.

The rapid inflation in the Eurozone, including in Estonia, was not caused to any notable degree by the extremely liberal policies of the ECB for many years, despite opinions to the contrary.

The central bank’s asset purchases or “printing” lasted seven or eight years, while average price growth in the euro zone was limited to 2% before the middle of last year. It would have been even lower if the ECB had not taken this measure to stimulate the economy.

The effect of the ECB’s quantitative easing was limited, however, as much of the extra money did not reach businesses and individuals. The banks have simply been unable to find enough ways to lend the money created by the ECB’s asset purchases.

Loan growth remained rather modest in the euro area. In other words, the market did not see too much money that would have caused prices to rise sharply through major investments or increased spending.

That said, the ECB would be responsible for the potential deepening of price gains if we failed to react to increasingly broad-based inflation. The full effects of central bank decisions on rising prices will not manifest themselves for a few years, all the more reason not to hesitate. This realization is behind the ECB’s decisions this week.

The ECB’s additional asset purchases will be concluded from 1 July. In addition, we have decided in principle to start raising central bank interest rates in July. Financial markets have been anticipating this change for some time, which is why Euribor interest rates, usually referenced in loan agreements, have risen recently. The 6-month Euribor rate which affects most Estonian borrowers and which had been negative since 2015 is again above zero as of this week.

While the ECB’s decision to make mortgages more expensive for individuals in a situation where rapid inflation is making life difficult for everyone may seem paradoxical, inflation would accelerate even more without an interest rate hike, which would clearly be the worst development. It would be very difficult to contain inflation if the credibility of the central bank suffered if we hesitated. This would require an even bigger hike in interest rates and perhaps at the cost of a recession.

Rapid inflation is hitting everyone’s income and savings, while those less fortunate are likely to be hardest hit. They spend a large part of their income on meeting their basic needs and generally do not have real estate or other investments that could hold their value. The European Central Bank aims only its decisions to return to an inflation of approximately 2% in the years to come.

A look back in history suggests that Eurozone interest rates will remain very low in the Eurozone even after several consecutive hikes. Let me remind you that the six-month Euribor rate, to which we have become accustomed to remaining negative, was on the other side of 5% in 2000 and 2008. That is why the Bank of Estonia for years demanded that commercial banks take a conservative approach to home loans, which means that the creditworthiness of the borrower must take into account much higher potential interest rates.

In summary, it is clear that the central bank must play a role in controlling the price progression that we are prepared for. Since the decisions of the European Central Bank are based on the economic situation of the whole euro area, Estonia needs to take further economic policy measures to contain its even faster than average price increase. This means that Estonia must be careful not to further accelerate price growth through excessive spending and loan-based investment.

Those less fortunate who are most affected by soaring energy and food prices must be offered well-targeted assistance. Investments that could contribute to permanently reducing the pressure on prices caused by expensive energy must be chosen wisely.

Going too far in giving people perks and large-scale tax cuts could end up making things worse, including for the less fortunate, if it makes inflation worse.

Follow the news of the ERR on Facebook and Twitter and never miss an update!

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Russia brings policy rate back to pre-war level https://bobsbirdhouse.com/russia-brings-policy-rate-back-to-pre-war-level/ Fri, 10 Jun 2022 10:56:33 +0000 https://bobsbirdhouse.com/russia-brings-policy-rate-back-to-pre-war-level/ The national flag flies above the headquarters of the Russian Central Bank in Moscow, Russia, May 27, 2022. Maxim Chemetov | Reuters The Central Bank of Russia on Friday lowered its key rate by 150 basis points to 9.5%, the level at which it was at the start of the Russian invasion of Ukraine. While […]]]>

The national flag flies above the headquarters of the Russian Central Bank in Moscow, Russia, May 27, 2022.

Maxim Chemetov | Reuters

The Central Bank of Russia on Friday lowered its key rate by 150 basis points to 9.5%, the level at which it was at the start of the Russian invasion of Ukraine.

While acknowledging that the external environment for the Russian economy remains “challenging and significantly restricting economic activity”, the central bank’s board said in a statement that “inflation is slowing faster and the decline in economic activity is of a lesser magnitude” than he predicted in April.

“Recent data suggests that the rates of price growth in May and early June were weak. “a marked decline in inflation expectations of households and businesses,” the CBR said.

This is the fourth rate cut since an emergency hike from 9.5% to 20% in late February, following Russia’s invasion of Ukraine. It was last cut from 14% to 11% at an extraordinary meeting in late May.

Russian inflation slowed to an annual rate of 17.1% in May from 17.83% in April, its highest level since January 2002, indicating that the immediate inflationary shock of the war in Ukraine and international sanctions that resulted may have peaked.

Meanwhile, the ruble survived a fall to historic lows against the dollar after the invasion to become the best-performing fiat currency in the world, although economists are skeptical about the sustainability of the rally.

The currency jumped around 4% against the dollar following Friday’s decision. The ruble was trading at just over 57 to the dollar at midday London time.

The CBR said it would continue to take into account the dynamics of inflation and the “economic transformation process” being implemented in an effort to mitigate the long-term damage from Western sanctions.

Policymakers now expect annual inflation in Russia to be between 14.0 and 17.0% in 2022, fall to 5.0 and 7.0% in 2023 before returning to 4% in 2024.

“Overall, the actual decline in economic activity in the second quarter of 2022 is less pronounced than the Bank of Russia assumed in its April baseline scenario. In view of the above, the Bank of Russia estimates that the fall in GDP in 2022 could be less than the April forecast,” the CBR said.

The bank’s next rate decision meeting is July 22.

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History tells us that UK interest rates will rise and rise https://bobsbirdhouse.com/history-tells-us-that-uk-interest-rates-will-rise-and-rise/ Wed, 08 Jun 2022 04:00:18 +0000 https://bobsbirdhouse.com/history-tells-us-that-uk-interest-rates-will-rise-and-rise/ Hours after the Bank of England raised its main interest rate to 1% in May and warned that there would be more to come, mortgage lenders began to withdraw some of the extremely low rates that they offered. Twitter was alive with people bragging about getting a 1.2% five-year deal days earlier. Overnight rates nearly […]]]>

Hours after the Bank of England raised its main interest rate to 1% in May and warned that there would be more to come, mortgage lenders began to withdraw some of the extremely low rates that they offered.

Twitter was alive with people bragging about getting a 1.2% five-year deal days earlier. Overnight rates nearly doubled as financial markets believed the central bank would increase its main interest rate to 2.5% in one year.

Even 2.5% will still be a very low rate. Since the establishment of the Bank of England in 1694, its bank rate (under various names) has been 2.5% or less for only about a sixth of the time it has existed. This was mainly due to the 2% emergency rate that started with World War II and ended more than a decade later. Almost everything else happened in the last 13 years after the banking crisis, when it was below 1%.

My own calculations show that the BoE’s official rate has averaged 4.66% daily since the bank’s inception. Omitting the last particular years, this increases slightly to 4.83%.

My current bedtime reading is A history of interest rates by Sidney Homer and Richard Sulla. He explains that in 1694 the new Bank of England set its first rate at 6%, chosen to match the maximum allowed for private lending under the Usury Act of 1660. This rate was reduced to 5% in 1714 and the bank rate followed it there. for 100 years.

Throughout Queen Victoria’s reign (1837-1901), money was lent at 5% and government borrowed at 3% – despite the uncertainty created by frequent wars and the occasional bank crash. This safe and guaranteed return on the “consols” – the funds as they were called – supported the incomes of aristocrats and the growing wealthy middle classes.

For most of the 19th century, inflation remained relatively stable and wages doubled. The poor were allowed to get richer, although the rate of growth was relatively slow.

Thus, the 2.5% discount rate forecast by the market for 2023 would be barely half the typical rate over most of the BoE’s 328 years. If the economy returns to what used to be normal, we should expect a discount rate of 4% or 5%. This can only make the loan more expensive, which would also be normal.

Homer and Sylla also go back much further, revealing that the maximum rates allowed in Mesopotamia from 3000 to 400 BCE were between 20 and 33⅓%. These are not bank rates, of course, but the actual interest charged to individuals when they borrow money to buy cash or grain.

Our banks lend today like the Mesopotamians – the average credit card rate in April was 26.6% (annual percentage rate), according to the financial website Moneyfacts. This is five times a rate that would have been prohibited until the usury laws were repealed in 1854. Even the Romans prohibited loans at rates above 12%. In Renaissance Europe, where the modern bank was invented, money was lent at between 10 and 15%.

Never in the last 5,000 years have rates been as low as 1% – until February 2009. In 2012, when the bank rate was 0.5%, the BoE ensured that low rates were passed on to borrowers by lending money to retail banks at 0.75 percent. cent through the loan financing program.

Four years later, the Term Funding Scheme lent £192 billion to banks and others at just 0.25%, the same discount rate at the time. Banks have dutifully cut mortgage rates, leading buyers to borrow recently at rates starting with 1. They have also cut rates on savings, which are only just beginning to show the first signs of recovery.

All of this is being halted by inflation which is now 11.1%, 9% or 7.8% depending on what one believes of the three main measures (yes, there are many more than this) published by the Office for National Statistics.

Unlike Victoria’s reign, where prices at the end of her reign were lower than at the start, Elizabeth II’s 70 years on the throne saw prices rise in every year but one by an average of 5.14%. The Monetary Policy Committee (MPC) was established in 1997 to keep inflation at 2.5%, as measured by the retail non-mortgage interest price index (RPIX) – later changed to 2% as measured by the CPI.

Since its first meeting in June 1997, the nine-member MPC has solemnly sat down every six weeks to discuss whether to raise or cut rates, then – regardless of the direction of the vote – deciding almost every time that a quarter of a percentage point would be enough. Over these 25 years, CPI inflation has averaged 2.0%. Work done.

This was partly due to a new leverage given to the MPC called quantitative easing (QE). This mechanism magically extracted thin electrons from money and, in just over 10 years, created £895 billion which was used almost exclusively to buy back public debt. During this decade, the MPC invented the one thing most politicians tell us doesn’t exist, becoming the Money Tree Policy Committee.

Whatever QE has done to economic activity – it was supposed to increase it, but in March this year growth was minus 0.1% after being flat in February – the impression of so much virtual money has inevitably spurred inflation.

Now, as inflation takes off, the only way the BoE can try to control it is to raise the discount rate. And the cost of the money lent to us can only go one way – up, up and, probably, up.

Paul Lewis presents ‘Money Box’ on BBC Radio 4, broadcast just after midday on Saturdays, and has been a freelance financial journalist since 1987. Twitter: @paullewismoney

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Personal loan rates drop slightly for 5-year fixed rate loans https://bobsbirdhouse.com/personal-loan-rates-drop-slightly-for-5-year-fixed-rate-loans/ Mon, 06 Jun 2022 21:51:52 +0000 https://bobsbirdhouse.com/personal-loan-rates-drop-slightly-for-5-year-fixed-rate-loans/ Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders, all opinions are our own. The latest personal loan interest rate trends from Credible Marketplace, updated weekly. (Stock) […]]]>

Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders, all opinions are our own.

The latest personal loan interest rate trends from Credible Marketplace, updated weekly. (Stock)

Borrowers with a good credit application personal loans in the last seven days pre-qualified for higher rates for 3-year loans and lower for 5-year loans compared to the previous seven days.

For borrowers with credit scores of 720 or higher who used the Credible Marketplace to select a lender between May 30 and June 5:

  • Rates on 3-year fixed-rate loans averaged 11.66%, down from 11.25% the previous seven days and from 11.69% a year ago.
  • Rates on 5-year fixed rate loans averaged 13.75%, down from 14.05% the previous seven days and from 13.23% a year ago.

Personal loans have become a popular means of consolidate and pay off credit card debt and other loans. They can also be used to cover unexpected expenses like medical billstake care of a major purchase or finance home improvement projects.

3-year fixed-rate personal loan rates have risen over the past seven days, while 5-year loan rates have fallen slightly. Rates for 3-year terms increased slightly by 0.41% and rates for 5-year terms decreased by 0.30%. Despite the increase in 3-year fixed rate loans, rates for this term are lower than the same period last year. Borrowers can enjoy interest savings with a 3 or 5 year personal loan now.

Whether a personal loan is right for you often depends on several factors, including the rate you may qualify for. Comparing several lenders and their rates could help you get the best possible personal loan for your needs.

It’s always a good idea to comparison store on sites like Credible to understand how much you qualify for and choose the best option for you.

Here are the latest personal loan interest rate trends from the Credible Marketplace, updated monthly.

Personal Loan Weekly Rate Trends

personal-loan-6622.jpg

The table above shows the average prequalified rates for borrowers with credit scores of 720 or higher who used the Credible Marketplace to select a lender.

For the month of May 2022:

  • 3-year personal loan rates averaged 11.12%, down from 10.69% in April.
  • 5-year personal loan rates averaged 13.27%, down from 13.36% in April.

Personal loan rates vary widely depending on credit rating and length of loan. If you’re curious about what kind of personal loan rates you might qualify for, you can use an online tool like Credible to compare the options of different private lenders. Checking your rates will not affect your credit score.

All Credible Marketplace lenders offer fixed rate loans at competitive rates. Since lenders use different methods to assess borrowers, it’s a good idea to ask for personal loan rates from multiple lenders so you can compare your options.

Current personal loan rates by credit score

Credible-credit-score-trends.jpg

In May, the average prequalified rate retained by borrowers was:

  • 8.26% for borrowers with credit scores of 780 or higher choosing a 3-year loan
  • 29.40% for borrowers with credit scores below 600 choosing a 5-year loan

Depending on factors such as your credit score, the type of personal loan you are looking for, and the repayment term of the loan, the interest rate may differ.

As the chart above shows, a good credit rating can mean a lower interest rate, and rates tend to be higher on loans with fixed interest rates and longer repayment terms.

How to get a lower interest rate

Many factors influence the interest rate a lender can offer you for a personal loan. But there are steps you can take to increase your chances of getting a lower interest rate. Here are some tactics to try.

Increase credit score

Generally, people with higher credit scores qualify for lower interest rates. Steps that can help you improve your credit score over time include:

  • Pay your bills on time. Payment history is the most important factor in your credit score. Pay all your bills on time for the amount owed.
  • Check your credit report. Check your credit file to make sure there are no errors. If you find any errors, dispute them with the credit bureau.
  • Reduce your credit utilization rate. Paying off credit card debt can improve this important credit score factor.
  • Avoid opening new credit accounts. Apply for and open only the credit accounts you really need. Too many serious inquiries on your credit report in a short time could lower your credit score.

Choose a shorter loan term

Personal loan repayment terms can vary from one to several years. Typically, shorter terms come with lower interest rates because the lender’s money is at risk for a shorter period.

If your financial situation allows it, applying for a shorter term could help you get a lower interest rate. Keep in mind that the shorter term doesn’t just benefit the lender: by choosing a shorter repayment term, you’ll pay less interest over the life of the loan.

Get a co-signer

You may be familiar with the concept of a co-signer if you have student loans. If your credit isn’t good enough to qualify for the best personal loan interest rates, find a co-signer with good credit could help you get a lower interest rate.

Remember that if you are unable to repay the loan, your co-signer will have to repay it. And co-signing a loan could also affect their credit score.

Compare rates from different lenders

Before applying for a personal loan, it’s a good idea to shop around and compare offers from several different lenders to get the lowest rates. Online lenders generally offer the most competitive rates and can be quicker to disburse your loan than a physical establishment.

But don’t worry, comparing rates and terms doesn’t have to be a tedious process.

Credible is easy. Simply enter the amount you wish to borrow and you can compare several lenders to choose the one that suits you best.

About Credible

Credible is a multi-lender marketplace that allows consumers to discover the financial products best suited to their particular situation. Credible’s integrations with major lenders and credit bureaus allow consumers to quickly compare accurate and personalized loan options without putting their personal information at risk or affecting their credit score. The Credible Marketplace delivers an unparalleled customer experience, as evidenced by over 4,500 positive Trustpilot reviews and a TrustScore of 4.7/5.

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Bank account interest rates are rising – how to take advantage https://bobsbirdhouse.com/bank-account-interest-rates-are-rising-how-to-take-advantage/ Sat, 04 Jun 2022 19:19:45 +0000 https://bobsbirdhouse.com/bank-account-interest-rates-are-rising-how-to-take-advantage/ Select’s editorial team works independently to review financial products and write articles that we think our readers will find useful. We earn commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners. Editor’s note: The APYs listed in this article are current at the time of publication. They […]]]>

Select’s editorial team works independently to review financial products and write articles that we think our readers will find useful. We earn commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.

Editor’s note: The APYs listed in this article are current at the time of publication. They can fluctuate (up or down) when the Fed rate changes. Select will be updated as changes are made public.

As the economy recovers from the effects of the Covid-19 pandemic, inflation has unfortunately soared to 40-year highs. As a result, the Federal Reserve decided to raise interest rates.

Interest rates, which you may already be familiar with since they are often mentioned when it comes to loans and mortgages, also affect the money in your bank account. Money in your checking and savings accounts may earn interest, and the APYs of these accounts are also affected by Federal Reserve interest rates.

Below, select details on what you need to know about your bank account interest rate and why you might want to consider switching banks to take advantage of the latest rate increase.

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Bank account interest rates are on the rise

If you already have a high yield savings account, you may have noticed a recent increase in your account’s APY. This is because the Federal Reserve, the central bank of the United States, has gradually raised rates to help slow the pace of inflation. Chances are your bank has followed suit.

That’s good news for consumers, because interest earned on money in your High Yield Savings Account can further bolster your savings. However, it’s important to be strategic about your account to ensure you get the most out of it.

How to Choose and Maximize a High Yield Savings Account

With a high yield savings account, you can earn a considerable amount of interest (at least compared to standard checking and savings accounts). Unfortunately, many traditional banks offer checking and savings accounts with near-zero interest rates, which means your money is essentially losing value due to inflation because it’s not growing. But with the cost of living rising, any additional method of fighting inflation is worth considering.

To ensure you get the maximum amount of interest, be sure to put your hard-earned money in a high-yield savings account such as Varo Savings Where *American Express® High Yield Savings Account.

It should be noted that these types of accounts should not be treated as a checking account. If you regularly withdraw money, it defeats the purpose of having a high-yield savings account and your interest income will be much less because it will reduce the accumulating power.

A good use for a high-yield savings account is to store money for your emergency fund and other medium-to-long-term goals like a down payment on a house or car. It’s important to note that if you’re saving for the long term, you’ll probably want to invest your money in the market in index funds, which have much greater growth potential if you have a long-term investment horizon.

There are dozens of high-yield savings accounts available in the market, both through in-person and online banks. While the benefits of each account vary, you should look out for these essential features:

  • The highest annual percentage yield, or APY, possible
  • User-friendly website and mobile app
  • Easily accessible customer service
  • No minimum deposit or minimum balance
  • It’s insured by the FDIC
  • No charges

Here’s a look at some of our favorite high yield savings accounts that are currently available.

SoFi Checking and Savings

  • Monthly maintenance fees

  • Minimum deposit to open

  • The minimum balance

  • Annual Percentage Yield (APY)

    Members with direct deposit earn 1.25% APY on the first $50,000 of their balances. Members without direct deposit will earn 0.70% APY.

  • Network of free ATMs

    More than 55,000 free ATMs within the Allpoint® network

  • Reimbursement of ATM fees

  • Overdraft fees

    Free overdraft coverage is available; however, SoFi requires $1,000 in monthly direct deposit entries to unlock it

  • Mobile check deposit

Advantages

  • No minimum deposit to open an account
  • 1.25% APY with direct deposit
  • 2-day prepayment automatically when you set up direct deposit
  • Save your change automatically with Roundups and set savings goals with Vaults
  • Earn up to 15% cash back at local establishments
  • No foreign transaction fees

The inconvenients

  • No reimbursement for out-of-network ATM fees
  • This is not a standalone checking or savings account

Varo savings account

Bank account services are provided by Varo Bank, NA, Member FDIC.

  • Annual Percentage Yield (APY)

    Start earning 1.20% and qualify to earn 5.00% if you meet the requirements

  • The minimum balance

    None; $0.01 to earn savings interest

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

    Yes, if you have a Varo bank account

Advantages

  • High APY and chance to earn even more
  • No minimum balance
  • No monthly fees
  • Up to 6 free withdrawals or transfers per statement cycle*
  • ATM Access at 55,000 Free AllPoint® ATMs with a Varo Bank Account
  • Offers 2 programs to help you automate your savings

The inconvenients

  • Cash deposits are only available through third-party services, which charge a fee

Vio Bank High Yield Online Savings Account

Vio Bank is a division of MidFirst Bank, Member FDIC.

  • Annual Percentage Yield (APY)

  • The minimum balance

  • Monthly fee

    None, if you opt for paperless statements (otherwise $5 per month)

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

Advantages

  • Strong APY
  • No monthly fees, if you opt for paperless billing
  • Up to 6 free withdrawals or transfers per statement cycle*
  • Easy to use mobile banking app

The inconvenients

  • Minimum balance of $100 to open an account
  • $5 monthly maintenance fee, if you don’t opt ​​for paperless billing
  • $10 fee per transaction if you make more than 6 in a statement cycle
  • No option to add a current account
  • No ATM access

Marcus by Goldman Sachs High Yield Online Savings

Goldman Sachs Bank USA is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • The minimum balance

    None to open; $1 to earn interest

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

Advantages

  • No minimum balance (only $1 to earn interest)
  • No monthly fees
  • Up to 6 free withdrawals or transfers per statement cycle*
  • Easy to use mobile banking app
  • Offers free personal loans

The inconvenients

  • No option to add a current account
  • No ATM access
  • You cannot deposit a check through the mobile app

When choosing a high-yield savings account, it’s equally important to ask yourself the following questions and make sure you can tick these financial boxes before applying:

Although an emergency fund is a basic financial tool, in some cases your money may be better spent elsewhere.

At the end of the line

As Americans continue to battle the effects of inflation, rising interest rates should help slow the rise in the price of daily consumer goods. If you’re looking for a way to earn passive income and a place to keep your emergency fund, transferring your money to a high-yield savings account can definitely be worth it.

Check out Select’s in-depth coverage at personal finance, technology and tools, The well-being and more, and follow us on Facebook, instagram and Twitter to stay up to date.

*National Bank American Express is a member of the FDIC.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

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