Loan interest – Bobs Birdhouse http://bobsbirdhouse.com/ Mon, 21 Nov 2022 16:19:11 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://bobsbirdhouse.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Loan interest – Bobs Birdhouse http://bobsbirdhouse.com/ 32 32 Young Woodland residents struggle to buy homes amid high interest rates – Daily Democrat https://bobsbirdhouse.com/young-woodland-residents-struggle-to-buy-homes-amid-high-interest-rates-daily-democrat/ Mon, 21 Nov 2022 15:49:18 +0000 https://bobsbirdhouse.com/young-woodland-residents-struggle-to-buy-homes-amid-high-interest-rates-daily-democrat/ Buying a home in Woodland is becoming less and less accessible for young adults and other potential homeowners as mortgage rates hit their highest levels in decades. According to Zillow, the median home price in the town of Woodland has increased by around $120,000 to $570,000 since the start of 2021. Although Woodland is still […]]]>

Buying a home in Woodland is becoming less and less accessible for young adults and other potential homeowners as mortgage rates hit their highest levels in decades.

According to Zillow, the median home price in the town of Woodland has increased by around $120,000 to $570,000 since the start of 2021.

Although Woodland is still less expensive than many Northern California towns, high interest rates have increased monthly payments significantly. The interest rate for loans to buy a house jumped from 3% to 7% in 2022.

“It just stopped being affordable,” said Joseph Lynch, a Woodland real estate appraiser. “At the beginning of the year, you could get a loan at 3% and your payment would be $1,500. Now it’s almost $3,000 for the same loan. That’s all in a nutshell.

Lynch added that these increases have put a damper on young people’s dreams of being able to buy their first home.

“Right now it’s tough if you’re looking to buy your first home,” Lynch said. “It doesn’t matter where you are. The cost of money right now is so high. It’s very difficult to buy your first home, especially if you don’t have any equity.

Young Woodland residents say they have little hope of affording a home at current prices and mortgage rates.

“It’s not just inside people here anymore,” said Celeste Fregoso, 23, a Woodland resident. “It’s a lot of people from Davis who have moved here for new housing.”

Fregoso moved to Sonoma for college in 2017 and returned after graduating to a much more developed Woodland.

“I would love to own a house,” Fregoso said. “I live with my parents because the rent is insane.”

According to Fregoso, people started calling Davis “Wavis” after many students decided to move to Woodland for cheaper options.

Hunter Hoffman, a 20-year-old Woodland resident who cannot afford a home, said the north side of town has been taken over by residents with Davis ties. The newcomers are people going to college in Davis or families who want their children to go to schools in Davis but choose to live here because the houses are cheaper.

“It’s a bit like that [northern] corner of Woodland is its own little ecosystem,” Hoffman said. “They have their own parks, their own little schools inside the housing communities.”

Efforts to preserve the Davis cityscape are now affecting Woodland, according to Fregoso. The people of Davis want to keep this town as it is.

“I don’t think they should try to turn a different city into a carbon copy,” Fregoso said. “Davis is a college town, and Woodland is not.”

Grandfathered Woodland residents feel locked into the city. Moving elsewhere in the city may be an unfeasible option.

“We got the house we have because it was given to us,” Fregoso said. “If we ever wanted to move somewhere else, it would be a bit impossible because we can’t afford it.”

Ryan Lundquist, who runs a Sacramento review blog, agrees that Woodland is much more affordable than Davis.

The median home price in Woodland is around $570,000. This same-size median-priced home in Davis is around $890,000, according to Realtor.com.

“It’s a much more expensive market,” Lundquist said. “For some people, [Woodland] is a sort of Davis haven…all over the region the market is reacting and saying we can’t afford these prices when they have more than doubled.

But there is reason for optimism, according to Lynch. He said home prices in the woods have peaked and market prices may decline.

Lundquist also agrees. He said the market started to see a sea change last spring.

“Honeymoon Market – which ended in April,” Lundquist said. “We are in a different arena right now where prices have come down. The market is starting to falter in a lot of places in the Sacramento area… It was almost like when mortgage rates were dropping below 3%. It was like a steroid for the market. Buyer demand has gone crazy.

By Tony Rodriguez and Cameron Salerno

This story is part of a collaborative project between the Woodland Daily Democrat and the seniors of the Sacramento State Journalism Program. For more information, visit facebook.com/sacstatejournalism.

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Personal loan interest rates increase slightly for 3 and 5 year fixed rate loans https://bobsbirdhouse.com/personal-loan-interest-rates-increase-slightly-for-3-and-5-year-fixed-rate-loans/ Fri, 18 Nov 2022 23:11:28 +0000 https://bobsbirdhouse.com/personal-loan-interest-rates-increase-slightly-for-3-and-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 past seven days pre-qualified for higher rates for 3- and 5-year fixed rate 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 November 10 and November 16:

  • Rates on 3-year fixed-rate loans averaged 12.74%, down from 12.36% the previous seven days and from 11.72% a year ago.
  • Rates on 5-year fixed rate loans averaged 16.10%, down from 15.93% the previous seven days and from 14.09% 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.

Personal loan interest rates have increased over the past seven days for 3 and 5 year fixed rate loans. Rates on 5-year loans increased by 0.17 percentage points, while 3-year loans saw a larger increase of 0.38 percentage points. In addition to today’s increases, interest rates for both loan terms are higher than they were this time last year. Yet borrowers can take advantage of interest savings now with a 3- or 5-year personal loan. Both loan terms offer significantly lower interest rates than higher cost borrowing options like credit cards.

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

nov-18-credible-trends.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 October 2022:

  • 3-year personal loan rates averaged 12.37%, down from 11.65% in September.
  • 5-year personal loan rates averaged 15.84%, down from 15.60% in September.

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-chart-nov-18.jpg

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

  • 9.90% for borrowers with a credit score of 780 or higher choosing a 3-year loan
  • 29.90% for borrowers with a credit score below 600 who choose 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 table 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 multiple 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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These factors will affect your bike loan interest rates in 2023! https://bobsbirdhouse.com/these-factors-will-affect-your-bike-loan-interest-rates-in-2023/ Wed, 16 Nov 2022 07:09:20 +0000 https://bobsbirdhouse.com/these-factors-will-affect-your-bike-loan-interest-rates-in-2023/ While the start of 2022 saw a slump in automobile sales, the two-wheeler segment remained popular among Indian citizens. Two-wheeler sales are on an upward trajectory with popular brands such as Honda and TVS seeing monthly growth. During the holiday season, brands offered numerous offers and deep discounts, which led to retail sales growth of […]]]>

While the start of 2022 saw a slump in automobile sales, the two-wheeler segment remained popular among Indian citizens. Two-wheeler sales are on an upward trajectory with popular brands such as Honda and TVS seeing monthly growth. During the holiday season, brands offered numerous offers and deep discounts, which led to retail sales growth of 9% year-on-year in September.

During this period, future bicycle owners took advantage of nominal interest rates offered by lenders. The two-wheeler loan interest rate dictates the viability – and cost – of a two-wheeler for any buyer. Banks, NBFC and captive finance companies offer interest rates ranging from 6.85% to around 28.3% per annum. If you are planning to buy a two-wheeler in 2023 and want to opt for bike financing through a two-wheeler loan, you should know the various factors that may affect the interest rate of your loan bike.

Types of bike loan interest rates

When applying for a two-wheeler loan, it is important that you know the different types of two-wheeler loan interest rates.

– Fixed interest rate: If you opt for a fixed interest rate, the EMI amount remains the same throughout the repayment period. The interest rate remains unchanged regardless of market movements.

– Variable interest rate: If you choose a variable interest rate, the EMI amount may change depending on market conditions. Thus, the variable interest rate may be lower or higher than the fixed interest rate, which leads to uncertainty.

Factors Influencing Bike Loan Interest Rates

If you opt for bicycle financing through a two-wheeler loan and choose a fixed interest rate, then several factors can influence the interest rate.

One of the main factors that can influence the interest rate of a two-wheeled loan is your credit score. Today, banks are afraid to approve loans if you have a credit score of less than 750. On the other hand, NBFC sanctions loans even if the applicant has a credit score of 600. However, the rate of interest in relation to the loan amount is considerably high. . So, if you can establish a good credit profile and have a credit score of over 750 in 2023, your loan application will be approved fairly quickly and you will enjoy nominal interest rates.

While looking through bike financing options, you should consider making a substantial down payment, covering 30-40% of the vehicle’s on-road price. This, in turn, leads the lender to charge a nominal interest rate.

  • Employment status and income

Your professional situation and your income play an essential role in determining the interest rate of the two-wheeler loan. If you are a salaried employee and earn more than ₹1 Lakh per month, your loan application will be approved faster and you can avail low interest rates.

If you plan to stay or move to a metropolitan city this year or in 2023, you will incur high interest rates. This is due to the debt-to-income ratio (DTI). Since your daily expenses will be higher in metropolitan cities than in Tier 2 cities, your income will need to be significantly higher to repay the loan. Thus, the lenders can charge a higher rate of interest on the loan amount.

Your age will also play an important role in determining the interest rate for the two-wheeler loan. You can easily pay off your debt if you are young – in your 20s or 30s. However, your ability to repay decreases significantly if you are older – in your late 50s. Lenders will consider these factors while expanding bike financing options. So, the older you are, the higher the interest rate will be. If you are about to reach your late 50s in 2023, then you will have to bear high interest rates.

The model of two-wheeler, its type and its brand also influence the interest rate charged by the lender. The more expensive the two-wheeler, the higher the interest rate. Lenders prefer to finance bikes that inherently have a high resale value.

Finally, the term of your loan will also affect the interest rate on the loan amount. The longer the repayment period, the lower the interest rate.

How to lower the interest rate of the two-wheeler loan?

If you still have at least 5-6 months left before opting for bike financing in 2023, there are several steps you can take to improve your credit profile. This, in turn, will allow you to benefit from low interest rates.

Improve your credit score

You can try to improve your credit score, and this can be done by paying off your debts and paying your EMIs on time. Once your CIBIL score reaches 750, you can apply for a bicycle loan and benefit from a lower interest rate for the two-wheeler loan.

Debt to income ratio

You can also improve your debt-to-equity ratio by paying off old loans, reducing miscellaneous expenses, and making credit card payments on time. If you bring your debt ratio below 40%, you’ll have a better chance of getting attractive interest rates on your bike loan.

Improve your relationship with the lender

You can either negotiate with the lender or apply for a two wheeler loan from a lender with whom you have an existing relationship. You can talk to your bank and see if you can get low interest rates on the two wheeler loan.

Conclusion

The aforementioned factors will dictate the interest rate for your two-wheeler loan. Additionally, you can aspire to get low interest rates by improving your credit profile and debt-to-equity ratio in 2023. Some lenders also have no minimum credit score requirements and offer nominal interest rates with flexible repayment terms. For example, Bajaj Markets offers two-wheeled loans at low interest rates and does not require a minimum credit score! You can benefit from attractive interest rates for the loan of two-wheelers by opting for bicycle financing options on the digital platform.

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Granite Point offers a 15% return – but for how much longer? https://bobsbirdhouse.com/granite-point-offers-a-15-return-but-for-how-much-longer/ Sun, 13 Nov 2022 16:35:00 +0000 https://bobsbirdhouse.com/granite-point-offers-a-15-return-but-for-how-much-longer/ Umnat Seebuaphan/iStock via Getty Images Introduction I monitor the financial health of Granite Point Mortgage Trust (NYSE: GPMT), a mortgage REIT focused on commercial real estate, to ensure that my investment in the REIT’s preferred shares remains a good idea. Due to the sharp rise in interest rates and growing concerns about the general well-being […]]]>

Umnat Seebuaphan/iStock via Getty Images

Introduction

I monitor the financial health of Granite Point Mortgage Trust (NYSE: GPMT), a mortgage REIT focused on commercial real estate, to ensure that my investment in the REIT’s preferred shares remains a good idea. Due to the sharp rise in interest rates and growing concerns about the general well-being of the global economy, the common unit price also began to decline.

Chart
Data by YCharts

Focus on Q3 results

At first sight, the results of Q3 are quite disappointing. Although interest income increased, interest expense increased at a faster rate, causing net interest income to decline by more than 15% to just $18.3 million.

income statement

GPMT Investor Relations

As you can see in the image above, Granite Point also recorded a provision for credit losses of $35.4M and after deducting operating expenses of $8.4M, GPMT recorded a loss net loss of $25.5 million and after deducting preferred dividend payments, the net loss attributable to common unitholders of Granite Point was approximately $29.1 million or $0.56 per share.

While you can argue that GPM would have remained profitable had it not been for the loan loss provision, that’s hardly comforting. Even if not a single dollar would have been recorded as an allowance for loan losses, the net income attributable to common unitholders of GPMT would still have been just over $6 million or $0.12. per share. And that doesn’t even come close to the quarterly distribution of $0.25.

Even looking at distributable earnings, it’s now the fourth consecutive quarter (before accounting for write-offs) that the distribution on ordinary shares has gone uncovered.

Calculation of Distributable Profits

GPMT Investor Relations

A portion of the loan loss provision will materialize in the fourth quarter, so it may not be entirely fair to add the full $35.4 million to distributable earnings, given that there will be a blow in the fourth quarter. Or as explained in the GPMT press release:

In October 2022, successfully resolved a senior loan of $114.1 million that was in non-recognition status. The resolution involved a coordinated sale of the collateral commercial property and GPMT providing the new group of owners with a new senior loan of $77.3 million backed by new equity invested in the property by the new sponsor. As a result of these transactions, GPMT expects to realize a loss of approx. ($16.5) million, which had been reserved through the provision for credit losses.

That being said, if a $16.5 million haircut is what was needed to support the new owners and make the new loan perform well, it might be worth it depending on the terms of the new loan (we’ll find out likely after Q4 results are released as the new $77 million loan is expected to be in the top 15 largest loans). While I appreciate the decisive action to ensure an unmatured loan starts contributing to GPMT’s bottom line again, it raises questions about further reorganizations in the near future. Based on the breakdown at the end of September and knowing that the unexpired loan was a $114 million loan on an asset in Pasadena, California, the restructured loan should be the one I highlighted below. While I originally liked the relatively low LTV ratio of GPMT investments, I am negatively surprised to see a discount of over $16 million on a loan that has a stabilized LTV ratio below 60%.

Breakdown of largest loans

GPMT Investor Relations

Fortunately, Granite Point will likely be a little more conservative in the coming quarters as it aims to collect repayments but does not plan to invest heavily in new loans.

But we certainly expect to see a slowdown in the pace of repayments over the course of the year. But this is offset by the fact that we are building liquidity and being very cautious in this uncertain market. So we’re not looking to add a lot of short-term loans. So while repayments will slow down, our originations will remain quite modest in the meantime.

Although I don’t mind a speculative investment, I stick to preferred stocks

As you may recall from older articles, I currently have a long position in Granite Point preferred stock, which is trading with (NYSE:GPMT.PA) as a stock symbol.

As a reminder, the preferred shares were issued last November and the underwriters confirmed that the issue price would be $25 and the preferred dividend would be $1.75 per year for a preferred dividend yield of 7%. . As mentioned in the introduction, the preferred dividend will be reset in 2027 (if Granite Point does not call the preferred securities). The call date is November 30, 2026, and from the next preferred dividend payment, in 2027, the preferred dividend is updated at the three-month SOFR rate plus a mark-up of 583 basis points. A second interesting feature is that there is a floor: the minimum preferential dividend will be 7%, even if the three-month SOFR would be zero.

The three-month SOFR rate is currently around 4.26%, which would indicate that the preferred shares would have a return of around 10% on the principal value of $25 per share if the SOFR rate remains at the current level. But even at 3.5% for example, the preferred dividend would increase to 9.33% * $25 = $2.3325 per share. Assuming the current price of preferred shares is below US$20, this would imply a current yield of 12.1% based on Thursday’s closing price of US$19.27 per preferred share.

Stock Price Chart

Looking for Alpha

The higher the SOFR rate, the more likely Granite Point Mortgage is to call the securities if the cost of capital becomes too high. With the first call date still four years away, it’s far too early to start speculating on a call, and for now I’m happy to collect the $1.75 in annual preferred dividend payments.

Investment thesis

Based on distributable earnings, the preferred dividend is still fully covered, but after including the $16 million write-off on the California loan that was restructured after the end of the quarter, even the preferred dividend would not have been covered. . Hopefully the other loans that are currently placed in non-recognition status can be resolved soon without much impact. Finding a solution for all of these loans is important, as the lack of interest payments on these outstanding loans negatively impacted Q3 results by 8 cents per share.

While common units of GPMT are trading at almost a 60% discount to NAV/share over $15, I’m still sticking with Cumulative Preferred Shares for now.

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How to Get a $15,000 Personal Loan – Forbes Advisor https://bobsbirdhouse.com/how-to-get-a-15000-personal-loan-forbes-advisor/ Thu, 10 Nov 2022 18:45:04 +0000 https://bobsbirdhouse.com/how-to-get-a-15000-personal-loan-forbes-advisor/ Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors. If you’re looking to remodel your kitchen, consolidate debt, or pay for another major expense, you might be looking for a $15,000 personal loan. There are plenty of lenders out there that […]]]>

Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

If you’re looking to remodel your kitchen, consolidate debt, or pay for another major expense, you might be looking for a $15,000 personal loan. There are plenty of lenders out there that offer $15,000 loans, so it’s worth shopping around for the lowest rates and fees. Lenders generally offer the best rates to borrowers with strong credit and stable income.

Follow these five steps to get a $15,000 loan.

1. Consider qualification requirements

Before approving you for a $15,000 loan, lenders look at your credit, income, and other factors. Although loan criteria vary from institution to institution, some common qualification requirements for personal loans include:

  • Credit. Lenders examine your credit to assess your risk as a borrower. Borrowers with good credit (at least 670 on the FICO scoring model) tend to get the best rates. You can check your credit score for free with Experian and Equifax or buy it at myFICO.com. You can also review your credit history with a free annual report from AnnualCreditReport.com.
  • Revenue. You will also need a stable source of income to qualify for the loan. Lenders ask for pay stubs, W-2 forms, or other documents to make sure you have the funds to repay the amount you borrow.
  • Debt-to-income ratio (DTI). When reviewing your application, lenders also look at your DTI ratio, which shows your monthly debt payments compared to your gross monthly income. Aim for a DTI ratio of 35% or less.

2. Prequalify with multiple lenders

A loan of $15,000 is a considerable sum, so it’s worth shopping around for the best rate. Many lenders allow you to prequalify for a loan online, which means you can check the rates you might qualify for without impacting your credit score or your obligation to borrow.

Prequalification only takes a minute or two. You will enter some basic personal information and consent to an indirect credit inquiry. After you submit your details, the lender will let you know which offers you qualify for.

3. Compare your offers

Once you’ve collected some loan offers, take the time to compare the details of each. Pay close attention to interest rates and fees, including origination, disbursement, application and prepayment fees.

The annual percentage rate (APR) is a more inclusive rate than the interest rate alone, as it takes into account both interest and fees. The loan with the lowest APR will generally be the most affordable.

The repayment terms you choose also affect your borrowing costs. Lenders sometimes offer better rates on shorter loan terms and higher rates on longer terms.

4. Complete and submit your application

Once you have selected a loan offer, your next step is to complete and submit your application. This application will collect more details than the prequalification form.

You will fill in your personal information, such as your contact details and address, as well as the purpose of your loan. You’ll also upload verification documents, such as ID, proof of address, payslips, and W-2s.

Once you have signed and submitted your application, the lender will perform a credit check to review your credit profile. Unlike the soft credit application, this rigorous credit check could lower your credit score by a few points. However, your score should rebound quickly as long as you repay your loan on time.

5. Manage and repay your loan

After completing your application, the lender will review your information and check your credit. This process can take a few days or weeks, but some lenders can approve loans within 24-48 hours.

Once approved, the lender will deposit the proceeds into your bank account, which you can use to pay any approved expenses. Review your documents to find out when your first payment is due. You will repay the loan on a monthly basis.

Some lenders offer a rate reduction if you set up automatic payments from your bank account. Even if your lender doesn’t offer this rate reduction, it might be a good idea to set up automatic payment so you don’t miss any payments.

How to get a $15,000 loan with bad credit

Having bad credit can limit your options for a $15,000 loan. However, it’s still worth shopping around, as some lenders have more flexible credit requirements than others. Start with your current bank or credit union, as they may offer benefits to existing customers.

You can also look for a secured personal loan rather than an unsecured loan. Secured personal loans are backed by collateral, such as a car title or savings account. They tend to have more lax credit requirements, but you risk losing your asset if you fall behind on your payments.

Some lenders also allow you to apply to a co-signer or co-borrower to offset limited credit. Adding a creditworthy co-signer or co-borrower to your application could help you qualify for a $15,000 loan if you cannot meet a lender’s requirements on your own.

Finally, you can take steps to improve your credit score before you apply if you don’t need the loan right away. If you spot errors on your credit report, dispute them. Paying down current loan balances and lowering your credit utilization ratio can also improve your score.

Where to get a $15,000 loan

Long-term costs of a $15,000 loan

When you borrow a $15,000 loan, you end up paying back over $15,000. This is because interest charges and fees add to your borrowing costs.

Your long-term costs will vary depending on your rate, fee structure, and repayment terms. A higher interest rate will increase your costs while a lower rate will make your loan more affordable.

Let’s say you borrow a $15,000 loan with a repayment term of five years. If you get 10%, expect to pay $4,122.34 in interest over the life of your loan. If you can qualify for 6%, your total interest costs drop to $2,399.52.

The repayment term you choose also impacts your long-term costs. A shorter term generally means lower interest charges, while a longer term means you’ll pay more interest over the life of the loan.

Let’s go back to this example of a loan of $15,000 at a rate of 10%. As mentioned, a five-year term equates to just over $4,100 in interest charges. But your interest charges will only be $2,424.28 with a three-year term. Alternatively, a seven-year term would mean interest charges of $5,917.49.

Use a calculator to estimate your loan costs

The Forbes Advisor Personal Loan Calculator can help you estimate your long-term costs for borrowing a $15,000 loan under different repayment terms. As you crunch the numbers, try to find a term that makes your monthly payment affordable while reducing long-term interest costs.

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India’s SBI sees loan growth remain strong after record profit https://bobsbirdhouse.com/indias-sbi-sees-loan-growth-remain-strong-after-record-profit/ Sat, 05 Nov 2022 11:35:00 +0000 https://bobsbirdhouse.com/indias-sbi-sees-loan-growth-remain-strong-after-record-profit/ MUMBAI, Nov 5 (Reuters) – The State Bank of India (SBI) (SBI.NS), the country’s biggest lender, expects credit growth to remain in double digits while stepping up efforts to attract more deposits, where it sees growth in line with the sector. The bank reported a 74% increase in quarterly net profit on Saturday, driven by […]]]>

MUMBAI, Nov 5 (Reuters) – The State Bank of India (SBI) (SBI.NS), the country’s biggest lender, expects credit growth to remain in double digits while stepping up efforts to attract more deposits, where it sees growth in line with the sector.

The bank reported a 74% increase in quarterly net profit on Saturday, driven by higher loan growth and improving asset quality.

Net profit hit a record 132.64 billion Indian rupees ($1.62 billion) in June-September, beating analysts’ forecast of 105.30 billion rupees, according to Refinitiv IBES data.

Net interest income, the difference between interest earned and interest paid, rose 13% to 351.82 billion rupees.

Advances increased by 18.15%, while deposits increased by 9.99%.

“We should have credit growth of 14-16% in the current fiscal year,” President Dinesh Kumar Khara said at a press briefing.

“Now we also have cash investments, which we plan to unwind. That is why we are confident to support credit growth,” he said, adding that there was an improvement in the capacity utilization and that operations were back to pre-pandemic levels.

The bank has a term loan pipeline of Rs 2.4 trillion as it sees demand coming from sectors such as infrastructure, renewable energy and services.

And, while the bank did not give a growth target for deposits, Khara said SBI would not lag behind the industry.

Indian banks saw a 17.95% year-on-year jump in credit growth in the fortnight from Oct. 7, according to central bank data, and market participants expect an acceleration in credit growth. growth in the coming months. Deposit growth was 9.63% during this period.

SBI’s core net interest margin (NIM), a key indicator of profitability, improved to 3.55% from 3.50% a year earlier. It expects to maintain national NIMs at current levels.

The quality of the lender’s assets also improved, with gross non-performing assets (NPA) falling to 3.52% from 3.91% in the previous three months. Net NPA also improved, falling 20 basis points.

Total provisions fell to 30.39 billion rupees in June-September from 43.92 billion rupees in the previous quarter.

The bank’s capital adequacy ratio stood at 13.51%, down from 13.35% a year earlier.

($1 = 81.9620 Indian rupees)

Reporting by Nupur Anand in Mumbai and Neha Arora in New Delhi; Editing by Mark Potter

Our standards: The Thomson Reuters Trust Principles.

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What is Projection Bombing and how is it used? https://bobsbirdhouse.com/what-is-projection-bombing-and-how-is-it-used/ Wed, 02 Nov 2022 10:30:10 +0000 https://bobsbirdhouse.com/what-is-projection-bombing-and-how-is-it-used/ The morning encounter with Al Tompkins is a daily Poynter briefing of story ideas to consider and other timely context for journalists, written by Senior Professor Al Tompkins. Sign up here to get it delivered to your inbox every weekday morning. The Jacksonville Weekend Incident where someone projected an anti-Jewish message on a tall building […]]]>

The morning encounter with Al Tompkins is a daily Poynter briefing of story ideas to consider and other timely context for journalists, written by Senior Professor Al Tompkins. Sign up here to get it delivered to your inbox every weekday morning.

The Jacksonville Weekend Incident where someone projected an anti-Jewish message on a tall building in full view of a football game crowd is an example of a tactic called “projection bombing”. The Sheriff’s Department’s Chief Information Officer, TN Dash, wrote an email saying:

At this time, the sheriff’s office has not identified any crimes that have been committed; the posted comments do not include any type of threat and are protected by the first amendment.

“We will continue to monitor all reports of this nature to determine if they rise to (the) level of a criminal nature.”

The FBI is also investigating, according to Sherri Onks, FBI Special Agent in Jacksonville:

“Investigating these acts remains a top priority for the FBI because hate crimes are not just an attack on the victim – these acts are meant to threaten and intimidate an entire community.”

Using projections is not a new tactic. In 2011, Occupy Wall Street protesters projected messages onto a New York skyscraper. The guy behind this event explained how he got away with it.

Projection bombing can involve high-brightness projectors that can sell for upwards of $10,000, but it doesn’t have to be. Some online tutorials are for protesters who use projectors that aren’t much brighter than virtually any desk could have in the conference room. The key, the tutorials say, is to project on a dark, simple structure.

(Instructables.com)

Protesters have used projection bombing in Europe for years. In 2018, the Guardian spoke to Nick Dearden, “a veteran splash bomber” who staged several high profile splash stunts, including one on the walls of Parliament.

Dearden recruited an anonymous guerrilla searchlight operator who contacted him. They threw “#REFUGEE WELCOME” on the White Cliffs of Dover just before a far-right rally in the city. Using a standard, powerful projector and clever software to prevent distortion, the man set up a tripod on the beach below the cliffs.

Last year the same man turned up at Britain’s most popular bombing site; halfway along Westminster Bridge it projected the words “Say no to Trump” in the Houses of Parliament, the day before MPs debate the President’s proposed state visit. “We were really nervous about the police, but it looked like we were just taking pictures,” Dearden recalled.

All of this technology allows protesters, including hate groups, to project their words onto walls they don’t own or have permission to use. And there seems to be little to stop them. It’s just the last way for enemies to spread hatred. Anti-Semitic incidents in the United States have been on the rise for years, with 941 incidents in 2015 and 2,717 tracked in 2021 by the Anti-Defamation League. The ADL keeps a constantly updated list of these attacks. Click on the image below to access it. This screenshot shows hate messages from the past few days only.

(Anti-Defamation League)

The Federal Reserve Board will vote on the latest interest rate hike today, and an increase of 0.75% seems likely. Eventually, such an increase will drive up everything from mortgage rates and auto loan interest rates to credit card interest rates. The key question is how far will the Fed go if this hike does not translate quickly enough into a fall in the inflation rate?

The US central bank has increased its rate by 3% since March. Three of those increases were 0.75%, which is meant to shock the economy up or down. So far, the inflation rate has ignored increases.

Variable rate credit cards (and most are) adjust their interest on balances to the Fed’s benchmark rate. CNBC said:
Annual percentage rates are “closer to 19%,” on average, from 16.3% at the start of the year, according to Bankrate.

In addition, households are increasingly relying on credit cards to purchase basic necessities, as incomes have not kept pace with inflation.

The average interest rate on a new five-year car loan is currently 5.63%, down from 3.86% at the start of the year and could top 6% with the next Fed decision, although consumers with higher credit scores may be able to secure better loan terms.

If you’re looking for ways to take advantage of rising interest rates, some online banks offer savings accounts at 3% or more. Your local bank probably still offers less than 1%. Some of the higher interest rates require a minimum balance of several thousand dollars.

You’ve heard of people being locked out somewhere because of COVID-19, but this one went much deeper.

(Twitter)

The BBC reported:
“This comes after Shanghai reported 10 locally transmitted cases on Saturday.”

The BBC added:

Millions of people there are fewer than 200 different lockdowns in China, as of October 24, as the country of 1.45 billion people consistently registers more than 1,000 new Covid cases a day. The numbers are seen as relatively low outbreaks in other parts of the world.

However, earlier this month, Chinese President Xi Jinping signaled that there would be no easing of the zero-Covid policy – which aims to eliminate all epidemics – calling it a “people’s war to stop spread of the virus”.

That’s not what the Democrats are hoping for. one week before polling day. Gasoline prices rose slightly this week. The national average price at the pump has climbed to $3.761 a gallon and supplies, especially on the East Coast, are tight.

The New York Times points out As food prices rise and restaurants and other food businesses say they need to raise prices to cover those costs, earnings reports show some of the biggest names in the industry posting big profits. The Times story raises the possibility that these companies are raising prices to increase profits, not just to cover higher costs. Airlines, soft drink companies, credit card companies, hotels and quick service restaurants all say consumers have money and are willing to spend it even if prices go up.

The Tax Policy Center says four out of 10 US households will end 2022 without paying federal income tax. This represents 72.5 million households. Moreover, in the years to come, even smaller percentages of households will bear the federal tax burden.

One of the reasons for the steep drop is that the standard 2022 tax deduction is increasing from last year. MarketWatch provides more details on how these numbers are changing.

I wonder how many people who complain about high federal taxes realize that they pay no federal income tax.

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Blackstone Mortgage Trust, Inc. (NYSE:BXMT) Brief Interest Update https://bobsbirdhouse.com/blackstone-mortgage-trust-inc-nysebxmt-brief-interest-update/ Mon, 31 Oct 2022 00:00:58 +0000 https://bobsbirdhouse.com/blackstone-mortgage-trust-inc-nysebxmt-brief-interest-update/ Blackstone Mortgage Trust, Inc. (NYSE: BXMT – Get Rating) benefited from a sharp drop in short-term interest rates in October. As of October 15, there was short interest totaling 6,780,000 shares, down 9.5% from the September 30 total of 7,490,000 shares. Based on an average trading volume of 1,940,000 shares, the day-to-cover ratio is currently […]]]>

Blackstone Mortgage Trust, Inc. (NYSE: BXMT – Get Rating) benefited from a sharp drop in short-term interest rates in October. As of October 15, there was short interest totaling 6,780,000 shares, down 9.5% from the September 30 total of 7,490,000 shares. Based on an average trading volume of 1,940,000 shares, the day-to-cover ratio is currently 3.5 days.

Insider Buying and Selling at Blackstone Mortgage Trust

In other news, CEO Katharine A. Keenan sold 2,270 shares of Blackstone Mortgage Trust in a trade on Friday, September 9. The shares were sold at an average price of $28.70, for a total transaction of $65,149.00. Following the transaction, the CEO now owns 120,872 shares of the company, valued at $3,469,026.40. The sale was disclosed in a filing with the SEC, which is available on the SEC’s website. In the past ninety days, insiders have sold 4,148 shares of the company worth $114,708. 1.06% of the shares are currently held by insiders of the company.

Hedge funds weigh on Blackstone Mortgage Trust

Institutional investors have recently changed their stake in the company. Karpas Strategies LLC increased its holdings of Blackstone Mortgage Trust shares by 1.6% during the third quarter. Karpas Strategies LLC now owns 84,730 shares of the real estate investment trust valued at $1,978,000 after purchasing an additional 1,365 shares in the last quarter. Prospera Financial Services Inc increased its stake in Blackstone Mortgage Trust by 3.8% during the third quarter. Prospera Financial Services Inc now owns 80,406 shares of the real estate investment trust valued at $1,877,000 after purchasing an additional 2,950 shares in the last quarter. Allspring Global Investments Holdings LLC increased its stake in Blackstone Mortgage Trust by 1.6% during the third quarter. Allspring Global Investments Holdings LLC now owns 69,687 shares of the real estate investment trust worth $1,626,000 after purchasing an additional 1,087 shares in the last quarter. Shikiar Asset Management Inc. increased its stake in shares of Blackstone Mortgage Trust by 152.1% in the third quarter. Shikiar Asset Management Inc. now owns 90,200 shares of the real estate investment trust worth $2,105,000 after purchasing an additional 54,425 shares in the last quarter. Finally, Artemis Investment Management LLP increased its equity stake in Blackstone Mortgage Trust by 3.2% in the third quarter. Artemis Investment Management LLP now owns 1,746,353 shares of the real estate investment trust worth $40,776,000 after buying an additional 53,809 shares in the last quarter. 55.28% of the shares are held by institutional investors and hedge funds.

Blackstone Mortgage Trust trades up 2.6%

BXMT stock traded down $0.64 at midday on Friday, hitting $25.45. The company’s shares had a trading volume of 1,928,284 shares, compared to an average trading volume of 2,903,944 shares. Blackstone Mortgage Trust has a 12-month low of $21.49 and a 12-month high of $34.04. The company’s 50-day moving average price is $26.31 and its 200-day moving average price is $28.61. The company has a market capitalization of $4.35 billion, a price-earnings ratio of 10.30 and a beta of 1.27.

Blackstone Mortgage Trust (NYSE:BXMT – Get Rating) last released quarterly earnings data on Wednesday, October 26. The real estate investment trust reported earnings per share of $0.71 for the quarter, beating the consensus estimate of $0.67 by $0.04. Blackstone Mortgage Trust had a net margin of 39.99% and a return on equity of 9.33%. During the same period last year, the company posted earnings per share of $0.57. As a group, stock analysts expect Blackstone Mortgage Trust to post EPS of 2.42 for the current fiscal year.

Blackstone Mortgage Trust announces dividend

The company also recently announced a quarterly dividend, which was paid on Friday, October 14. Investors of record on Friday, September 30 received a dividend of $0.62. This represents a dividend of $2.48 on an annualized basis and a yield of 9.74%. The ex-dividend date was Thursday, September 29. Blackstone Mortgage Trust’s payout ratio is 100.40%.

A Wall Street analyst gives his opinion

A number of stock analysts have recently released reports on BXMT shares. StockNews.com began covering Blackstone Mortgage Trust in a research report on Wednesday, October 12. They set a “hold” rating for the company. BTIG Research lowered its price target on shares of Blackstone Mortgage Trust from $32.00 to $28.00 in a research report on Wednesday. Credit Suisse Group cut its price target on shares of Blackstone Mortgage Trust to $27.00 in a research note on Thursday, October 13. Finally, JPMorgan Chase & Co. lowered its price target on Blackstone Mortgage Trust shares from $30.00 to $27.50 and set a “neutral” rating for the company in a Monday, October 24 research note. .

About Blackstone Mortgage Trust

(Get an assessment)

Blackstone Mortgage Trust, Inc, a real estate finance company, issues senior loans secured by commercial properties in North America, Europe and Australia. The Company operates as a real estate investment trust for federal income tax purposes. It would generally not be subject to US federal income tax if it distributed at least 90% of its taxable income to its shareholders.

Read more

This instant news alert was powered by MarketBeat’s narrative science technology and financial data to provide readers with the fastest and most accurate reports. This story was reviewed by MarketBeat’s editorial team prior to publication. Please send questions or comments about this story to contact@marketbeat.com.

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The next surge in fixed mortgage rates is coming https://bobsbirdhouse.com/the-next-surge-in-fixed-mortgage-rates-is-coming/ Wed, 19 Oct 2022 03:11:00 +0000 https://bobsbirdhouse.com/the-next-surge-in-fixed-mortgage-rates-is-coming/ ANZ is the first to react to much higher wholesale swap rates stemming from surprise CPI data. The bank raises fixed mortgage rates by around +45 basis points and term deposit rates by around +30 basis points Well, it did. Much higher than expected CPI inflation level in Q3-2022 boosted the interest rate markets. And […]]]>

ANZ is the first to react to much higher wholesale swap rates stemming from surprise CPI data. The bank raises fixed mortgage rates by around +45 basis points and term deposit rates by around +30 basis points

Well, it did.

Much higher than expected CPI inflation level in Q3-2022 boosted the interest rate markets.

And these pressures have translated into significantly higher fixed mortgage rates.

First to move is ANZ, adding between +34bps and +55bps to its flat rate card.

ANZ’s two-year rate is now well above 6%, and the first time it has been this high since November 2011.

In fact, their rate of almost 6% over one year is the highest since February 2011.

ANZ also raised term deposit rates, between +15 basis points and +75 basis points. This translates into a six-month rate at 3.60% and a one-year rate at 4.30%.

The last time TD ANZ one-year rates were at this level was in February 2015.

(ANZ’s +75bps rise in term deposits was on their five-month supply, but that only takes it up to 3.00%, so more of a curve correction than a meaningful rise).

As ANZ is New Zealand’s largest retail bank, its pricing positioning has an influence on the market. There is no doubt that all his rivals will follow. The only question will be when.

From a borrower’s perspective, those who were on a two-year fixed rate two years ago are going to find the transition difficult. In mid-October 2020, ANZ’s two-year fixed rate was 2.55%. This rate is now 6.19%. If they took out a $580,000 mortgage in October 2020 (equivalent to 80% of the then national median home price of $725,000), their weekly payments will drop from $532 over the past two years to $818 per week for next two years. That’s a +$286/week jump, or +54%. In anyone’s budget, this will hurt.

A useful way to make sense of modified home loan rates is to use our full function mortgage calculator which is also below. (Term deposit rates can be estimated using this calculator).

And if you already have a fixed-term mortgage that is not up for renewal right now, our break cost calculator can help you assess your options. But break fees should be minimal in a rising market.

Here is the updated snapshot of the lowest advertised fixed term mortgage rates currently offered by major retail banks.

Select chart tabs


Select chart tabs


Complete Mortgage Calculator

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Nobel Prize-winning economist warns the Fed will be in ‘all sorts of trouble’ if it raises rates too quickly https://bobsbirdhouse.com/nobel-prize-winning-economist-warns-the-fed-will-be-in-all-sorts-of-trouble-if-it-raises-rates-too-quickly/ Sun, 16 Oct 2022 21:00:00 +0000 https://bobsbirdhouse.com/nobel-prize-winning-economist-warns-the-fed-will-be-in-all-sorts-of-trouble-if-it-raises-rates-too-quickly/ This seasoned journalist earned his MBA from the University of Chicago Booth School of Business. So I was delighted to learn that Douglas Diamond, one of his eminent professors, has just shared the Nobel Prize in Economics with former Fed Chairman Ben Bernanke and frequent Diamond collaborator Philip Dybvig of Washington University in St. Louis. […]]]>

This seasoned journalist earned his MBA from the University of Chicago Booth School of Business. So I was delighted to learn that Douglas Diamond, one of his eminent professors, has just shared the Nobel Prize in Economics with former Fed Chairman Ben Bernanke and frequent Diamond collaborator Philip Dybvig of Washington University in St. Louis. I have sadly missed having Diamond as my teacher since I graduated in 1973, six years before he joined the faculty. But during my years in Chicago, the university was teeming with future Nobel laureates in economics, and I saw many of them, mostly at the faculty tennis club.

A diminutive Milton Friedman double-teamed with the hulking George Stigler, who insisted on parking the tall Monetarist in the driveway while wielding his own wingspan to cover most of the ground. In the spring, I played almost daily with 2013 winner Eugene Fama, pioneer of efficient market theory, who displayed a singular style, serving right-handed and hitting left-handed groundstrokes, most of those latter lobs seeming magnetized at the baseline. Fama swung an early rickety metal racquet called the T2000 that made his misses sound like minor car crashes.

Since Diamond is a specialist in banking economics, I wanted to get his perspective on what the surge in inflation and the Fed’s hawkish stance in rapidly raising rates and rolling out quantitative tightening (QT) mean for businesses and individual borrowers, and the lenders themselves. On October 11, we spoke at length over the phone. Diamond was quick to note that his expertise was not in “macro” issues like Fed policy, interest rates, causes and solutions to inflation, but rather how the banking system works and how to ensure its stability.

Still, he added that central bank decisions have a huge impact on the lending ecosystem. And he expressed strong opinions on what he sees as the Fed’s recent big mistakes in promoting easy money, and the potential dangers of tightening too quickly in its quest to tame the raging CPI. . “One of the Fed’s purposes is to promote financial stability,” he told me. “But when the Fed changes real and nominal rates, it has a ripple effect on financial institutions and their borrowers that best not be ignored. The Fed has left rates too low for too long with no trickle down. Now they have to release the brakes. But if they slam on the brakes, they will cause an accident.

The research that won Diamond the Nobel Prize

Diamond won the prize for his research on the role of banks in society and how the model that makes these essential institutions so valuable also makes them vulnerable, demanding that governments and their own internal practices assure the public that the system is extremely safe. Banks take deposits from customers and channel that money into often long-term loans for everything from new factories to mortgages. As Diamond showed in an article with Dybvig, this process is much more efficient than the scenario in a non-banking world where people invest directly in projects that take years to complete. Why? Because whenever people need money in the short term, they withdraw funds from that investment and stop the factory or the housing development.

Banks solve this problem by keeping plenty of funds in reserve so that their depositors can withdraw cash at will for day-to-day needs, and by transferring their money to finance multi-year investments that stimulate growth. But the system, Diamond said, only works if people are confident it will continue to work. He is inherently vulnerable to rumors and frenzies. Because so much of all deposits are tied up in loans that don’t mature for years, banks can’t return most customer deposits, so they panic and demand payment right away. If word spreads that banks might fail, depositors will rush to withdraw their money, causing a collapse when the institutions were truly solvent.

Diamond emphasized the importance of government-backed deposit insurance that guarantees the security of depositors’ money and significantly reduces the innate fragility of banks. He also found that by diversifying their loan portfolios, banks increased security and reduced the costs of turning savings into productive investment. His models showed that by monitoring that their borrowers are using loans responsibly (for example, how lenders check the progress of property developments and advance more money for the next phase only when the previous one is successfully completed) , banks have served as watchdogs preventing fraud and waste. As the National Bureau of Economic Research stated after the Nobel Prize announcement, the “ideas of Diamond and Dybvig form the basis of modern banking regulation.”

Borrowers mistakenly thought the Fed-orchestrated low-rate world was the new normal

Diamond observes that a combination of questionable monetary and fiscal policy kept rates artificially low for an extended period that was to end, perhaps in heartbreak. “Government policymakers thought they could create as much debt as they wanted without causing inflation or driving up rates,” he told me. “Some stupid economists have been pushing the same crazy idea known as ‘modern monetary theory.’ He says that when real interest “rates” [rates adjusted for inflation] suck, you can borrow anything you want for a long time. The Fed created money to buy bonds issued by the Treasury, and all the easy money kept rates at zero. He says setting rates too low and running large deficits are both inflationary separately and in combination send prices skyrocketing on steroids. “If policymakers think real rates will stay at zero, they will do things to push them out of zero. High deficits and zero rates guarantee inflation will eventually rise,” Diamond says. Then the Fed will be forced to raise rates significantly to fight the inevitable outbreak, exactly what we are seeing today.

Rapid increases in the federal funds rate which, in turn, drive up yields on everything from two-year Treasuries to junk bonds, will hit our financial system with an unusually strong shock. “We went through a huge period from 2011 where rates were extremely low,” he says. “Zero real rates, putting the cost of borrowing at or below inflation, were hugely stimulative for borrowing. People thought the era of super low rates was going to continue. This brought borrowers to believe that it is very safe to finance itself by renewing short-term debt, always at the same rates.Why buy “insurance” on a sharp rise in rates that will never happen?In the past, companies protected themselves usually against spikes by locking in rates for a long time.This time the thought was, if you don’t think they will go up, stick with cheap short-term rates.

The rate jump that blind borrowers, Diamond says, will hammer them with unforeseen losses. “Government interest expense will increase, but the Treasury can continue to issue new bonds to cover the increase,” he says. “It is the private sector that is vulnerable. The high-yield and leveraged debt that has exploded over the past few years is mostly floating above Libor, and when current rates rise, interest charges for borrowers rise, and do so suddenly. As a result, many companies will face much higher interest charges that will erode profits, both on this variable debt and on other short-term borrowings that they considered such a big and long-lasting business. .

What about the institutions that provided the loans? The risk is different for big banks that fund loans through deposits than for their customers, Diamond says. “The big banks are well protected against interest rate changes,” he says. “The problem is that once rates rise quickly, some of their borrowers can’t repay the loans and default, forcing the banks to put the loans on their books.” He is particularly concerned about the likes of hedge funds, mortgage companies and other non-bank lenders who sell securities in capital markets to fund their loans. “This could cause problems not only for corporate borrowers and large banks, but also for non-bank institutions that have followed a similar path.”

The Fed may overtighten

Given the situation it created, Diamond says, the Fed had no choice but to raise rates dramatically. “The Fed has been doing a lot better lately,” he says. “They can keep raising rates, that will be the right thing to do.” But he raises a warning from Milton Friedman. “I worship Milton Friedman,” Diamond says. “He had a famous quote along the lines of ‘Fed policy has long and variable lags’.” real estate loans. Diamond believes that to defeat inflation, the Fed must achieve a significant “real” margin on the Fed Funds rate and on all maturities of government bonds. “If the ‘neutral’ real rate that achieves the Fed’s long-term inflation target of 2% is 1%, we need a higher real rate now to rein in inflation,” a- he declared. “It would take a real rate of at least 2% or even 3%.”

Currently, “core” inflation according to the Fed’s preferred measure, the Personal Consumption Expenditure Price Index (PECPI), stands at 4.9% in August. Reaching the 2% real rate that Diamond considers essential, and a minimum, would bring the Fed Funds benchmark close to 7%. That’s more than double the current reading of 3% to 3.25%. No wonder Diamond is so worried that any rate hike it deems necessary could do great harm to borrowers and the economy.

To prevent a collapse, he advises the Fed to act slowly and carefully. “The Fed needs to raise rates in a measured way over a long period of time because of the lag that Friedman was talking about,” Diamond says. “That’s how all those people who haven’t hedged and have taken on all the short-term, floating-rate debt can handle the shock.” He is also concerned about the unpredictable effects of QT. “It takes out cash and raises long-term rates relative to short-term rates,” he says. “If the Fed goes too fast on QT, it will cause all kinds of problems. A warning sign is that when they stopped quantitative easing in Britain, it almost triggered a crisis.

In conclusion, Diamond offers its own version of Warren Buffett’s famous line, joking that when the tide goes out, you can see who’s swimming naked. “It’s one of my favorites,” says Diamond. “The water has been so high for so long that people haven’t even put on a bathing suit. A lot of embarrassing things are about to happen. The Fed who blundered by filling the pond to such heights is the naked swimmer who should be most embarrassed of all.

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