Interest rates – Sendika12 http://sendika12.org/ Thu, 29 Sep 2022 16:52:31 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://sendika12.org/wp-content/uploads/2021/10/profile-120x120.png Interest rates – Sendika12 http://sendika12.org/ 32 32 How will rising interest rates affect the people of Fakenham? https://sendika12.org/how-will-rising-interest-rates-affect-the-people-of-fakenham/ Thu, 29 Sep 2022 16:42:00 +0000 https://sendika12.org/how-will-rising-interest-rates-affect-the-people-of-fakenham/ Published: 5:42 PM September 29, 2022 A mortgage broker has warned homeowners they expect ‘one hell of a payment shock’ following the expected rise in interest rates. Julie Memmory of Pro-Mortgages, based at estate agent Bailey Bird and Warren in Fakenham, said a number of people will be hit hard when their fixed rates come […]]]>

Published:
5:42 PM September 29, 2022



A mortgage broker has warned homeowners they expect ‘one hell of a payment shock’ following the expected rise in interest rates.

Julie Memmory of Pro-Mortgages, based at estate agent Bailey Bird and Warren in Fakenham, said a number of people will be hit hard when their fixed rates come to an end.

The uncertainty caused by Chancellor Kwasi Kwarteng’s “mini-budget” prompted some lenders to pull mortgage products from the market.

And on Monday, the pound fell to a record low against the US dollar.


Julie Memmory, of Pro-Mortgages based in Bailey Bird and Warren in Fakenham
– Credit: Nick Bird

Ms Memmory said interest rates had already risen since the start of the year, adding that some mortgage products were now coming back to market with higher rates.

And she warned that borrowers coming to term on a fixed-rate contract would face significantly higher repayments after negotiating a new fixed term.

“If they get to the end of a fixed rate, they’re going to have one hell of a payment shock,” Ms. Memmory said.

“They can either opt for another fixed rate or an ever-higher standard variable rate.


Estate agent Bailey Bird & Warren on Bridge Street.

Estate agent Bailey Bird & Warren on Bridge Street.
– Credit: Google Maps

“Someone in the Fakenham area was paying £370 for the last two or three years, and now you would expect them to pay £480. Can’t get any better than that – a £110 raise.

“We have an affordability check to look at the interest rate hike, so hopefully most customers will be able to afford it.

“But, couple that with rising energy bills, it will be very tight for them.”

Nick Bird, director of Bailey Bird and Warren, said it was too early to say what impact there will be on the Fakenham housing market, but revealed little effect was being felt so far.


Fakenham's Nick Bird has been playing Santa Claus for 20 years, visitin

Nick Bird, director of Bailey Bird and Warren, said it was too early to say what effect Fakenham’s market will have
– Credit: David Pulling

“There aren’t many mortgage buyers in North Norfolk. People often leave London to retire and downsize, buying the house with the proceeds from the sale.

“There aren’t many first-time buyers in the area. People starting out often live in the Norwich and King’s Lynn area.

“It is possible that the rental market will be affected. If people can’t afford the mortgage they want, they’ll use the rental market, which puts more pressure on the properties you rent – forcing them [landlords] increase the rent due to high demand.”

]]>
Homeowners warned of ‘significant’ rise in UK interest rates | Interest rate https://sendika12.org/homeowners-warned-of-significant-rise-in-uk-interest-rates-interest-rate/ Tue, 27 Sep 2022 23:10:00 +0000 https://sendika12.org/homeowners-warned-of-significant-rise-in-uk-interest-rates-interest-rate/ UK homeowners have been warned to prepare for a “significant” interest rate hike from the Bank of England in response to Kwasi Kwarteng’s mini tax cut package last week. Huw Pill, Threadneedle Street’s chief economist, added to the worries of millions of mortgage payers who have already seen hundreds of home loan products pulled by […]]]>

UK homeowners have been warned to prepare for a “significant” interest rate hike from the Bank of England in response to Kwasi Kwarteng’s mini tax cut package last week.

Huw Pill, Threadneedle Street’s chief economist, added to the worries of millions of mortgage payers who have already seen hundreds of home loan products pulled by lenders in anticipation of a sharp rise in the cost of borrowing.

As financial markets signaled that the Bank might need to raise interest rates by up to 6%, Santander, HSBC and Nationwide were among the big lenders signaling the end of cheap mortgages was coming to an end.

About one in 10 transactions have gone missing this week according to online mortgage platform Dashly. On Monday, there were 7,490 residential and rental mortgage products available, but on Tuesday night there were 6,609, down nearly 12%.

The Bank of Ireland, Clydesdale Bank, Post Office Money and a slew of building societies including Monmouthshire, Furness and Darlington were among those to withdraw proceeds.s.

Pill sought to downplay the possibility of an emergency rate hike by the Bank ahead of the next scheduled meeting of its nine-member monetary policy committee in early November.

But he made clear that a significant rise in official interest rates from their current level of 2.25% was in the offing – a move that will affect borrowers on variable rate mortgages and those with fixed rate agreements. fixed end.

“In my view, a combination of the tax announcements we’ve seen will act as a demand stimulus in the economy,” Pill said of the mini-budget. “It’s hard not to draw the conclusion that this will require a meaningful monetary policy response.”

The pound struggled again late in the session, falling below $1.07 against the US dollar amid reports that Kwarteng had to persuade a reluctant Liz Truss to issue a Treasury statement on Monday. intended to counter market chaos.

As well as affecting the pound, the fallout from the mini-budget continued to ripple through other financial markets, with sharp increases in interest rates paid by the government on its debts.

The cost of borrowing over five years was higher for the UK than for Greece or Italy. In another sign of the perceived risk of holding UK assets, the interest rate on 10-year government bonds hit 4.5%, double the rate paid by Germany.

The spread between UK and German bonds was the widest since 1991, while the spike in UK 10-year borrowing costs in recent days was estimated to be the biggest change in gilt yields since 1976, when a run for the pound resulted in a bailout. of the International Monetary Fund.

Pill said the Bank was not “indifferent” to recent movements in UK asset prices. Along with the falling pound and rising bond yields, the FTSE 250 index of UK mid-tier company shares closed last night at its lowest level in almost two years.

Christian Lindner, Germany’s finance minister, joined the long list of policymakers and economists expressing doubts about the Truss government’s attempt to boost growth as the Bank of England hiked interest rates.

“In the UK, a major experiment begins as the state simultaneously puts its foot on the accelerator while the central bank brakes,” Lindner said.

Former US Treasury Secretary Larry Summers has warned that the pound’s respite could be short-lived and that the UK government’s “totally irresponsible” plans could drag the pound below parity against the euro, as well as the dollar.

“The first step to regaining credibility is not to say unbelievable things. I was surprised when the new Chancellor spoke this weekend about the need for even more tax cuts. I don’t see how the Bank of England, knowing the government’s plans, decided to act so timidly.

Virgin Atlantic has urged the government to consider “backtracking” after the mini-budget, with the weaker pound driving up airline costs massively.

Shai Weiss, its chief executive, said the economic situation was “harming consumers” and the airline was deeply concerned, even though it believed its own bookings would hold up.

Kwarteng has dismissed any suggestion he might rethink last week’s package, insisting in a meeting with UK bank officials he was right to announce £45billion in tax cuts , which included the cancellation of the National Insurance contribution increase in April, a drop in the basic income tax rate from 20% to 19% and the abolition of the 45% rate paid by those who earn over £150,000 a year.

“We reacted immediately with an expansionary fiscal policy on energy because we had to. With two exogenous shocks – Covid-19 and Ukraine – we had to intervene. Our 70-year high tax burden was also unsustainable. said the Chancellor to the bankers.

“I am convinced that with our growth plan and the next medium-term budget plan – in close collaboration with the Bank, our approach will work.”

Downing Street has dismissed talk of a split between No 10 and No 11 over how to handle the market reaction to the mini budget and denied there was a row.

However, sources in Whitehall said there were discussions within the Civil Service over a row between the Prime Minister and the Chancellor at Monday morning’s meeting.

Sky News said Truss resisted Kwarteng’s suggestion that a Treasury statement was needed to calm markets.

]]>
Kalkine Media lists US stocks to watch as interest rates rise again https://sendika12.org/kalkine-media-lists-us-stocks-to-watch-as-interest-rates-rise-again/ Sat, 24 Sep 2022 13:44:00 +0000 https://sendika12.org/kalkine-media-lists-us-stocks-to-watch-as-interest-rates-rise-again/ M&T Bank Corporation (NYSE: MTB), Dollar General Corporation (NYSE: DG) and UnitedHealth Group Incorporated (NYSE: UNH) are the companies that have so far managed to stay in the green. Soaring prices have hurt the sentiments of market participants and policymakers alike lately. The Federal Reserve raised key rates to their highest level in about 15 […]]]>

M&T Bank Corporation (NYSE: MTB), Dollar General Corporation (NYSE: DG) and UnitedHealth Group Incorporated (NYSE: UNH) are the companies that have so far managed to stay in the green.

Soaring prices have hurt the sentiments of market participants and policymakers alike lately.

The Federal Reserve raised key rates to their highest level in about 15 years on Wednesday, September 21 to keep inflation under control. The central bank announced another three-quarters of a percentage point hike for the third time in September, bringing its projection range between 3% and 3.25%.

Let’s take a look at these stocks in a sloppy investment environment and see how they have performed so far in the looming economic difficulties:

M&T Bank Corporation (NYSE:MTB)

M&T Bank is one of the leading banks with a dividend yield of 2.56%. The US$32.6 billion company provides banking, lending and other investment-related services to its clients.

ATV stock has jumped about 20% year-to-date while gaining about 39% year-over-year. In the current quarter, it climbed about 16%. The bank holding company’s stock hit a 52-week high of $193.42 on August 16, 2022.

Meanwhile, on September 21, the New York-based bank announced that it had raised its prime rate from 5.5% to 6.25%, effective September 22.

The company’s board of directors has decided to pay a quarterly cash dividend of $1.2 on its common stock, payable September 30 this year.

M&T Bank’s total revenue jumped 11% year-on-year to US$571.1 million in the second quarter of FY22, while its net income fell 53% year-on-year to US$217.52 million. US dollars during the quarter.

Dollar General Corporation (NYSE:DG)

Dollar General is a variety store operator with a dividend yield of 0.9%. The $54.2 billion market capitalization company operates a chain of discount stores.

The variety store chain operator’s inventory is up about 1% year-to-date while rising about 9% year-to-date.

Dollar General Corporation’s revenue climbed 9% year-over-year to $9.4 billion in the second quarter of fiscal 2022. The Goodlettsville, Tennessee-based company’s net income soared 6.4% year-on-year to US$678 million in the second quarter of FY22.

Source: ©Kalkine Media®; © Canva Creative Studio via Canva.com

UnitedHealth Group Incorporated (NYSE: UNH)

UnitedHealth Group is a leading managed health care and insurance company with a dividend yield of 1.26%. The stock of the US$478.99 billion market capitalization company is up about 1% year-to-date while jumping 24% year-on-year.

In the second quarter of FY22, UnitedHealth Group’s revenue climbed 13% year-on-year to US$80.3 billion. Its net profit rose to US$5.19 billion in the second quarter of FY22 from US$4.37 billion a year ago.

At the end of the line

Although there are no guarantees, financial stocks, especially banks and insurers, tend to perform well even in a higher rate scenario. Additionally, due to higher costs and interest rates, consumers tend to shift their spending to discount stores to save money, which generally benefits discount store operators.

But, given the highly volatile global market and the Fed’s indications of further aggressive hikes in the coming months, it is difficult to predict the future state of the market.

Therefore, traders should do their due diligence before taking any action due to persistent macroeconomic headwinds.

]]>
Interest rates on micro loans will fall further: Udeesh Ullas, Muthoot Microfin https://sendika12.org/interest-rates-on-micro-loans-will-fall-further-udeesh-ullas-muthoot-microfin/ Fri, 23 Sep 2022 12:31:05 +0000 https://sendika12.org/interest-rates-on-micro-loans-will-fall-further-udeesh-ullas-muthoot-microfin/ In the absence of a proper banking system and loan disbursement mechanism in the interior regions, microfinance has become a lifeline to boost entrepreneurship in rural India. Micro-loans provided by Non-Banking Financial Companies (NBFCs) not only help people in rural areas to start their own businesses, but also help them break free from the clutches […]]]>

In the absence of a proper banking system and loan disbursement mechanism in the interior regions, microfinance has become a lifeline to boost entrepreneurship in rural India. Micro-loans provided by Non-Banking Financial Companies (NBFCs) not only help people in rural areas to start their own businesses, but also help them break free from the clutches of local lenders.

Muthoot Microfin COO Udeesh Ullas talks to Financial Express Online about how microfinance addresses issues such as financial inclusion and the integration of rural women into mainstream economic activities.

  1. How have microloans changed and impacted people’s lives?

Microfinance has been a boon to underserved and disadvantaged communities in remote rural areas of the country that did not have access to formal credit facilities. Over the past two decades, microfinance has penetrated these corners widely and offered easily accessible credit at reasonable interest rates. Microfinance has taken up two major challenges facing our country, namely financial inclusion and the integration of rural women into mainstream economic activities.

Microfinance has empowered millions of women by supporting their entrepreneurial endeavors and helping them achieve financial independence. It has further empowered women to have decision-making abilities and to be in charge of their lives. Microfinance has helped rural households and micro-enterprises to thrive, low-income households to stabilize their incomes and save for future needs; and in times of crisis, helped them to cope and rebuild.

  1. Is it easy or difficult to get a micro loan from Muthoot Microfin or in the industry?

Microfinance loans are the most easily accessible formal credit facility for rural households to support their small businesses without the need for any collateral to be pledged. Although formal banking has spread widely in rural areas, penetration in deep rural areas and especially among women is quite limited due to cumbersome procedures, requirement of collateral, proof of income and related formalities. Microfinance makes it easier for them to obtain timely and needed financial assistance with minimal documentation. At Muthoot Microfin, we provide collateral free loans following a simple and easy process with minimal documentation and at reasonable interest rates. Moreover, we offer the service directly at the doorstep of the customers, which allows them to avail a microfinance loan in a very convenient and easy way.

  1. What kind of interest rates are currently running in the industry; would you like them to change?

Currently, the industry operates in the interest band of approximately 19-25% (decreasing), which is risk-adjusted pricing for unsecured loans. RBI has also imposed strict guidelines on credit underwriting and pricing of microfinance loans. Before the emergence of microfinance, local lenders charged exorbitant interest rates of around 70 to 100%.

Improving overall macroeconomic conditions and the use of innovative technologies will help MFIs further reduce interest rates by at least 2-3% from what they currently charge. Technology and digitization will enable more specific and scientific credit assessments, leading to a better credit profile for customers and ultimately lower cost of lending to creditworthy customers.

  1. Where do you think the industry would evolve the most in the near future?

The sector is changing rapidly and I think the next major development will be the digitization of microfinance, especially in the “reimbursement” mode. Microfinance repayments are still largely collected in person by loan officers. After the demonetization, we converted 100% of the disbursements to a bank account, but the bulk of the collection still remains in cash.

In fact, this change is already in effect and gaining momentum, when the pandemic and related lockdown occurred, employee movement was restricted and cash receipts were severely disrupted. So we took a serious look at the alternatives and realized that digital was the way to go. We developed a customer application called “Mahila Mitra” and asked customers to install it on their smartphones or those of their family members. Currently, more than 1 million active customers have this app installed on their phones. We offered them several options such as UPI, BBPS, card payments, web portal, WhatsApp pay, etc. to make their repayments.

To promote digital cashback, we ran big campaigns and offered cashback to customers. It really helped and in 3 months the digital collection grew 5x, and now 25% of the total collection is received digitally. Our goal is to increase this percentage to 50% by the end of the fiscal year.

  1. How do you ensure the proper use and repayment of loans?

Before disbursing loans to clients, we give them three days of training, a process called “full group training”. One of the objectives of this session is to sensitize them on the proper use of the loan amount. All loans are issued for stated purposes only and as part of our operational process, Loan Utilization Verification (LUC) is conducted in the field by supervisory staff within 30 days of disbursement.

In case of repayment of loans, the installments are collected during a central meeting, during which the calendar of meetings is pre-fixed in consensus with all the members of the group. As it operates on a joint and several liability model, remittances from all clients are collected by the center manager at the center meeting and remitted to the loan officer. If a client of the group is in default, the members of the group share and pay on behalf of the member in distress.

  1. Are there any other unique benefits someone should approach you for a micro loan for?

As part of the Muthoot Pappachan group, we can offer several products to our clients (through different group companies) to meet their lifecycle needs, whether it is microfinance loans, loans cars, home loans, gold loans, savings, insurance, money transfer, etc. , which a typical microfinance institution cannot do. We use state-of-the-art technology to deliver a superior customer experience, such as paperless operations, door-to-door service, seamless transactions, and fast loan approvals.

In addition to the wide range of financial offerings products, we provide our clients with professional training, business acumen and financial literacy courses. Additionally, we conduct community outreach activities, which is an ongoing process that is tightly integrated and aligned with the organization’s business and societal goals. Vocational training programs aim to help rural women achieve better living standards by improving their employability skills.

In addition, we have set up e-clinics in our branches to provide our customers with accessible and affordable basic health care. Our clients can also benefit from the #RestartIndia campaign led by Muthoot Pappachan Group, which aims to offer advice and assistance to small businesses to restart their business after the lockdown and the pandemic.

]]>
Even as interest rates rise and prices fall, the housing market remains robust https://sendika12.org/even-as-interest-rates-rise-and-prices-fall-the-housing-market-remains-robust/ Mon, 19 Sep 2022 18:22:16 +0000 https://sendika12.org/even-as-interest-rates-rise-and-prices-fall-the-housing-market-remains-robust/ Vermont Business Magazine The latest housing data from RE/MAX for Burlington indicates that prices are up from last year, but have fallen over the past month. The current median home price is $410,000, up nearly 11% from a year ago but down 2.5% for the month. The August 2022 National Housing Report found that home […]]]>

Vermont Business Magazine The latest housing data from RE/MAX for Burlington indicates that prices are up from last year, but have fallen over the past month. The current median home price is $410,000, up nearly 11% from a year ago but down 2.5% for the month.

The August 2022 National Housing Report found that home sellers, on average, accepted offers below their listing prices last month – a further indication of housing market rebalancing. Mortgage interest rates have doubled since the Fed’s first rate hike last March and three times since then to a total of 2.25%. Today, the 30-year fixed rate at the New England Federal Credit Union is 6.162%. According to Freddie Mac, the 30-year average rate was 2.96 in 2021 and has averaged 7.76% since 1971.

Key metrics for Burlington below:

  • Median selling price of $410,000, up 10.8% YoY/down 2.5% on MOM
  • 297 deals closed, down 17.7% YoY/up 29.1% YoY
  • 257 new listings, down 3.4% YoY / up 5.3% in MOM
  • 1.04% price ratio close to current price, up 1.6% YoY/down 1.6% MoM
  • 21 days on market, down 16.5% YoY/up 19.7% MoM
  • 0.9 months of inventory supply, down 12.1% YoY/down 23.4% MO

Turning to the national scene, Nick Bailey, President and CEO of RE/MAX, said, “Patient shoppers were rewarded in August as prices fell from July. Sales increased as buyers “buy the dip” – which was not the trend many people expected. Activity depleted inventory slightly, although the number of homes for sale remained significantly higher than in the same period a year ago. The burst of activity at the end of the summer highlights the resilience of the housing market. Despite rising interest rates and concerns about the economy, demand remains strong. We’ll see what happens from now on, but August’s sales surge was great news for the industry. »

According to August data from the RE/MAX National Housing Report, home sellers, on average, accepted offers below their listing prices last month – another indication of the rebalancing of the housing market. Across the 51 metro areas in the report, the average near-list price ratio in August was 99%, meaning homes sold for 1% less than asking price. That’s down from 101% in July and 104% in April. The change helped August sales rise 5.3% from July, while the median selling price fell 2.4% to $410,000 after peaking at $426,000 three months earlier. early.

At the same time, new listings fell 12.8% from July and inventories fell 1.8% after four months of double-digit growth. Even so, the number of homes for sale was 20% higher than in August 2021.

In two-thirds of 2022, home sales were down every month compared to 2021. Other notable metrics include:

• Month of inventory supply was 1.6 months in August, down from 1.7 in July but up from 1.2 in August 2021.
• Days on market averaged 28, four days more than July and three days more than August 2021.
• August’s median selling price of $410,000 was 2.4% lower than July, but was up 7% year over year.

Local market highlights and metrics for August include:

New listings
Of the 51 metro areas surveyed in August 2022, the number of newly listed homes decreased 12.8% from July 2022 and 13.1% from August 2021. Markets with the largest drop in percentage of new year-over-year listings were Dover, DE at -59.4%, Milwaukee, WI at -33.6%, and St. Louis, MO at -27.1%. Washington, DC, at +13.2%, Raleigh, North Carolina, at +10.7%, and New Orleans, LA, at +8.4%, lead the increase in the percentage of new registrations from one year to the next.

Closed deals
Of the 51 metropolitan areas surveyed in August 2022, the total number of home sales increased 5.3% from July 2022 and 20.1% from August 2021. The markets with the largest declines in percent of year-over-year sales were Bozeman, MT at -44.1%, Las Vegas, NV at -37.3%, and Phoenix, AZ at -31.4%. No metro area saw a year-over-year percentage increase in sales.

Median Sale Price – Median of prices of 51 metropolitan areas
In August 2022, the median selling price for the 51 metropolitan areas was $410,000, down 2.4% from July 2022 and up 7.0% from August 2021. Two metropolitan areas recorded a year-over-year decline in median selling price, San Francisco, CA at -4.2% and Honolulu, HI at -0.7%. Twenty metro areas grew year over year by double digit percentages, led by Fayetteville, AR at +20.4%, Tampa, FL at +19.4% and Orlando, FL at +17.5% .

Price ratio close to the list – Average of prices of 51 metropolitan areas
In August 2022, the average close-to-list price ratio of the 51 metropolitan areas in the report was 99%, down from 101% from July 2022 and from 102% from August 2021. The close-to-list price ratio is calculated by the average value of the sale price divided by the list price for each transaction. When the number is greater than 100%, the house has closed for more than the listed price. If it is less than 100%, the house sold for less than the list price. The metro areas with the lowest price ratio were Washington, DC at 84%, followed by a tie between Bozeman, MT and Coeur d’Alene, ID at 97%. The highest near-list price ratios were in Burlington, VT at 104%, followed by a tie between Hartford, CT and Manchester, NH at 103%.

Days on Market – Average of 51 metropolitan areas
The average days on market for homes sold in August 2022 was 28, up four days from the July 2022 average and three days from the August 2021 average. the lowest days in the market were Dover, DE at 10, Baltimore, MD at 11, followed by a two-way tie between Philadelphia, PA and Washington, DC at 13. The highest days on the averages for the market were in Fayetteville, AR at 63, followed by a tie between New York, NY and Seattle, WA at 47. Days on market is the number of days from when a home is first listed in an MLS and the signing of a sales contract.

Months of inventory supply – Average of 51 metropolitan areas
The number of homes for sale in August 2022 was down 1.8% from July 2022 and up 20.0% from August 2021. Based on the rate of home sales in August 2022, the monthly inventory supply decreased to 1.6 from 1.7 in July 2022. , and increased from 1.2 in August 2021. In August 2022, markets with inventory supply for the lower was a tie between Albuquerque, NM and Manchester, NH at 0.7, followed by another tie between Charlotte, NC and Hartford, CT at 0.8.

About the RE/MAX network

As one of the world’s leading real estate franchisors, RE/MAX, LLC is a subsidiary of RE/MAX Holdings (NYSE: RMAX) with more than 140,000 agents in nearly 9,000 offices and a presence in more than 110 countries and territories. No one in the world sells more real estate than RE/MAX, as measured by residential transactions. RE/MAX was founded in 1973 by Dave and Gail Liniger, with an innovative entrepreneurial culture offering its agents and franchisees the flexibility to operate their business with great independence. RE/MAX agents have lived, worked and served in their local communities for decades, raising millions of dollars each year for Children’s Miracle Network Hospitals® and other charities. To learn more about RE/MAX, to search real estate listings or find an agent in your community, please visit www.remax.com. For the latest news on RE/MAX, please visit news.remax.com.

]]>
Scared of US interest rates https://sendika12.org/scared-of-us-interest-rates/ Sat, 17 Sep 2022 21:03:58 +0000 https://sendika12.org/scared-of-us-interest-rates/ WASHINGTON: Stubbornly high inflation is raising fears on Wall Street that the Federal Reserve will react by raising interest rates until the United States slips into recession, dragging with it a weakening global economy. As analysts say the US economy grew in the third quarter, signs of trouble are mounting, both at home and abroad. […]]]>

WASHINGTON: Stubbornly high inflation is raising fears on Wall Street that the Federal Reserve will react by raising interest rates until the United States slips into recession, dragging with it a weakening global economy.

As analysts say the US economy grew in the third quarter, signs of trouble are mounting, both at home and abroad. Rising mortgage rates cool US housing market; energy shortages are hurting production in German factories; and recurring coronavirus lockdowns are hampering Chinese businesses.

The Fed and other central banks are tightening credit to fight historically high inflation even as three of the world’s main economic engines – the United States, Europe and China – are collapsing. As the United States and other governments also cut spending on pandemic relief measures, the global economy is receiving less support from policymakers than at almost any time in 50 years, said the World Bank in a new report that warned of rising risks of a global recession.

Central banks, meanwhile, are engaged in the most aggressive rate hike campaign since the late 1990s, according to Citigroup. This month, central banks in Europe, Canada, Australia and Chile raised rates, and the Fed is expected to do so for the fifth time since March when it meets next week.

Some economists worry that the world’s central bankers are misreading the global economy in their rush to raise rates, just as they did – in the opposite direction – last year when they insisted that the inflation would be temporary and resisted to act. The cumulative effects of credit crunches in several countries at the same time could strangle global growth.

Fed rate hikes push the dollar higher against other major currencies, making imported goods cheaper for Americans, while making it harder for people and businesses in other countries to buy goods produced outside their borders.

Major oil importers like Tunisia have been particularly hard hit, since the price of crude is in dollars. The strength of the greenback is also hurting developing countries that have large debts in dollars. As their local currencies lose value against the dollar, more Turkish liras or Argentine pesos are needed to pay off the debt.

Despite raising its policy rate by two and a half points since March, the Fed has not been able to slow the economy enough to ease the pressure on prices. On Thursday, initial jobless claims fell for the fifth week in a row, the latest sign that the labor market remains too hot for the central bank’s comfort.

While strong hiring is good news for American workers, many economists have said unemployment will have to rise before inflation cools.

The Labor Department’s report this week that consumer prices in August were 8.3% higher than a year ago – little change from July’s 8.5% – disappointed investors. investors.

Some analysts expect the Fed to continue to hike beyond the 3.8% level that policymakers suggested in June to finish their anti-inflation job. On Friday, Deutsche Bank economists said the Fed’s benchmark lending rate could reach 5% next year, about double the current level.

Wall Street firms such as Oxford Economics said this week that the Fed would apply the brakes hard enough to contain prices, even if it sent the United States into a brief downturn.

“Higher inflation for longer, more aggressive monetary policy tightening by the Fed, and the negative fallout from a weakening global backdrop will combine to push the U.S. economy into a mild recession,” the statement said. company in a note to customers.

Since 1981, US and global growth have largely moved in tandem, according to research by Citigroup. In each of the four global recessions since 1980, the United States — which accounts for about a quarter of global gross domestic product, or GDP — has slowed either just before the global economy fell into a slump or at the same time.

The IMF said this summer that the global economy was at risk of sliding into recession due to aftershocks from the war in Ukraine, the pandemic and inflation. The IMF alarm followed a warning from the World Bank about the risk of global “stagflation”, a toxic combination of persistently high prices and anemic growth.

The big concern is Europe, which is struggling to adjust to the loss of Russian natural gas supplies. Moscow reacted to European sanctions after the invasion of Ukraine by cutting natural gas shipments to Europe by around 75%, according to Barclays.

As energy prices soared, consumers and businesses across the continent felt the pinch. After years of keeping borrowing costs below zero, the European Central Bank has hiked rates twice since July to rein in inflation that tops 9% – and plans further such measures despite the weakening economy.

]]>
Rising interest rates could scare away potential buyers https://sendika12.org/rising-interest-rates-could-scare-away-potential-buyers/ Fri, 16 Sep 2022 02:30:10 +0000 https://sendika12.org/rising-interest-rates-could-scare-away-potential-buyers/ Sep 16, 2022, 02:28Updated 2 hours ago By: News 12 Staff The hot housing market may be cooling, but interest rates are soaring. In fact, they’re now at their highest level since 2008, which could put off many potential buyers. Realtor Robin DiGirolamo says if someone is in the market to buy or sell a […]]]>

The hot housing market may be cooling, but interest rates are soaring.

In fact, they’re now at their highest level since 2008, which could put off many potential buyers.

Realtor Robin DiGirolamo says if someone is in the market to buy or sell a home, they shouldn’t be left on the sidelines.

“With interest rates at 6%, what is that compared to? Millennials are now facing 6%. When I bought a house, it was 14%,” says DiGirolamo.

She says anyone deciding to buy or sell a home should always consider interest rates, but it’s all about perspective. She adds that the benefits of selling or buying now should also be considered.

“Rents are at their highest ever, so we always say when you buy your house, you pay your own rent, you pay yourself, you are the landlord. When you rent from a landlord, you are paying their mortgage,” says DiGirolamo.

For others like Angela Favale who is buying her first home, her decision to buy in this climate was simple.

“It was just the moment,” says Favale, but admits the decision to make this decision was not easy. She and her husband have waited years, she says, but they just have to get started.

“Even after accepting the offer, it was one of those headaches [days]. One day you’re excited and happy, the next day you’re nervous,” says Favale.

Although Favale is ultimately happy with her decision, the numbers don’t lie.

This week, applications for mortgage loans fell by nearly 30% compared to the same date last year.

For those looking for options on Long Island, there are less than 7,000 homes for sale right now after a busy summer of shopping.

So DiGirolamo is telling potential buyers to brace themselves.

“You need to have pre-approval ready. Ready to go, you need to know what you’re comfortable buying and that way when something hits the market, you almost have the right of first refusal. “, explains DiGirolamo.

Another figure that stands out is that mortgage refinance applications are 83% lower than this time last year, which means a lot of people are definitely on hold.

]]>
US mortgage interest rates top 6% for the first time since 2008 https://sendika12.org/us-mortgage-interest-rates-top-6-for-the-first-time-since-2008/ Wed, 14 Sep 2022 11:52:53 +0000 https://sendika12.org/us-mortgage-interest-rates-top-6-for-the-first-time-since-2008/ The average interest rate on America’s most popular home loan has topped 6% for the first time since 2008 and is now more than double the level of a year ago, data from the Mortgage Bankers Association showed on Wednesday. (MBA). Rising mortgage rates are increasingly weighing on the interest-rate-sensitive housing sector as the Federal […]]]>

The average interest rate on America’s most popular home loan has topped 6% for the first time since 2008 and is now more than double the level of a year ago, data from the Mortgage Bankers Association showed on Wednesday. (MBA).

Rising mortgage rates are increasingly weighing on the interest-rate-sensitive housing sector as the Federal Reserve continues to aggressively raise borrowing costs to rein in high inflation. The central bank has raised its overnight lending rate by 225 basis points since March.

Expectations of Fed tightening have driven Treasury yields soaring since the start of this year. The yield on the 10-year note serves as a benchmark for mortgage rates.

The average contract rate on a 30-year fixed-rate mortgage rose 7 basis points to 6.01% for the week ended September 9, a level not seen since the end of the financial crisis and the Great Recession .

The MBA also said its Composite Market Index, a measure of mortgage application volume, was down 1.2% from the previous week and was now down 64.0% from a year ago. one year old. Its refinancing index fell 4.2% from the previous week and 83.3% from a year ago.

US small business sentiment rises in August: NFIB

A worse-than-expected key inflation reading on Tuesday cemented expectations that the Fed will be forced to make a third consecutive 75 basis point interest rate hike at its policy meeting next week, with investors predicting now that the central bank will have to raise rates faster and further than previously thought.

The impact of rising interest rates is being felt throughout the housing sector. New home sales fell to a 6.5-year low in July, while home resales and single-family housing starts are at two-year lows. But house prices remain high amid a critical shortage of affordable housing, making a housing market collapse unlikely.

]]>
Southside Bancshares: Rising Interest Rates Destroyed Book Value (NASDAQ:SBSI) https://sendika12.org/southside-bancshares-rising-interest-rates-destroyed-book-value-nasdaqsbsi/ Mon, 12 Sep 2022 15:30:00 +0000 https://sendika12.org/southside-bancshares-rising-interest-rates-destroyed-book-value-nasdaqsbsi/ gguy44/iStock via Getty Images Introduction Back in January, I wasn’t sure what to make of Southside Bancshares (NASDAQ:NASDAQ: SBSI). I could see that the bank offered good balance sheet and investment quality, but the the sharp rise in interest rates also weighed on the value of securities for sale, which must be valued at market […]]]>

gguy44/iStock via Getty Images

Introduction

Back in January, I wasn’t sure what to make of Southside Bancshares (NASDAQ:NASDAQ: SBSI). I could see that the bank offered good balance sheet and investment quality, but the the sharp rise in interest rates also weighed on the value of securities for sale, which must be valued at market price.

Chart
SBSI data by YCharts

Strong net interest income helped net income

During the second quarter of the year, the bank saw its net interest income increase as total interest income increased from $54m to $57m compared to the first quarter of the year, while that total interest expense increased from $5 million to $6 million. The result is an increase in net interest income from $49 million to $51 million. A decent result and the bank was able to maintain the extra loan loss provisions pretty. They were effectively non-existent on a net basis, with the bank writing off about $0.6 million of previously recorded provisions. Net interest income after taking into account these provisions for loan losses amounts to $51.7 million.

income statement

SBSI Investor Relations

Net non-interest expense in the second quarter was approximately $23 million, which includes a loss of $2.2 million on available-for-sale securities that were actually sold (I will explain later that AFS securities that have not been sold weigh on the book value per share, but are not included in the income statement). Higher net non-interest expense offset the positive performance in net interest income, and the bank reported total pre-tax income of $28.7 million. Strong increase from $24.2m in Q2 2021 due to $23m difference in loan loss provisions and $5.5m improvement in net interest income partially offset by higher net non-interest expense.

Net income was approximately $25.4 million, resulting in EPS of $0.79. That brings first-half 2022 EPS to $1.56. A decrease from the $1.69 recorded in the first half of last year, but that result included an $8.5m provision reversal that added about $0.25 per share to pretax earnings.

As Southside currently pays a quarterly dividend of $0.34, this dividend is very well covered as the payout ratio is less than 50% based on past quarters earnings.

The loan portfolio remains satisfactory, but the book value has fallen

In my January article, I was actually quite charmed by the bank’s high exposure to cash and securities, but unfortunately it didn’t work out as well as I had expected or hoped. While the balance sheet is certain to be safer when about half of assets are invested in liquid assets such as cash and securities, the bank held nearly $2.8 billion in available-for-sale securities. at the end of last year.

And as interest rates started to rise, the value of those securities went down, and precisely because they were accounted for as an available-for-sale security, Southside has to use market values ​​for those securities.

Asset side of the balance sheet

SBSI Investor Relations

As you can see above, the bank’s management team executed some very significant changes. The total amount of AFS securities fell by almost 40%, while the proceeds from these disposals were used to constitute the portfolio of securities held until maturity. These do not need to be marked down based on market prices and this should result in a more stable book value.

It is important to see that the bank still sticks to its exposure to liquid assets. At the end of 2021, the bank had approximately $3.06 billion in cash and securities, and by the end of June this had decreased slightly to $2.99 ​​billion. This still means that nearly 40% of the total amount of assets on the balance sheet was invested in liquid securities and cash. And around 30% of municipal securities in the portfolio available for sale are now hedged.

Looking at liabilities on the balance sheet, the only reason total equity dropped by $180 million is available-for-sale securities.

Balance sheet liabilities

SBSI Investor Relations

On a pre-tax basis, the bank actually had to take a discount of almost $300 million on securities held for sale. This is very unfortunate as it will be a few years before the bank can bring its book value back to the level of two quarters ago.

Statement of comprehensive income

SBSI Investor Relations

Fortunately, SBSI’s problems remain isolated from the interest rate issue that hits the value of available-for-sale securities. Looking at the bank’s loan portfolio, the total amount of unearned loans and delinquent loans remains very low. At the end of June, only $3.1 million of loans were in non-recognition status, while just under $5.8 million of loans were in default, as you can see below -below.

Lending book quality

SBSI Investor Relations

Since the total provision for loan losses still exceeds $35 million, the bank has a very healthy cushion even in the (unlikely) event that no dollar can be recovered on these loans.

Investment thesis

Given that the bank has decided to add more held-to-maturity securities to the portfolio and has also invested in higher-yielding mortgage-backed securities, we should see a substantial increase interest income and net interest income in the third quarter.

Although the bank appears to be reasonably priced from an earnings perspective at around 11 times earnings, which isn’t too bad considering the local bank runs a safe balance sheet, the premium to book value tangible has increased considerably.

At the end of 2021, SBSI had net equity (defined as equity less goodwill) of $711 million or approximately $22/share, but due to value destruction in the securities portfolio, the value equity had fallen to just under $732 million by the end of June. After deducting $201 million of goodwill, tangible equity fell to just $531 million, or just $16.5 per share. This means the bank is now trading at more than 2x tangible book value, and while that makes SBSI very attractive if you’re speculating on sudden interest rate cuts, that valuation is just a tad too high for my liking. .

A very well run bank, but I’m not interested in the current valuation.

]]>
ECB raises interest rates by 0.75%, a record https://sendika12.org/ecb-raises-interest-rates-by-0-75-a-record/ Thu, 08 Sep 2022 05:11:19 +0000 https://sendika12.org/ecb-raises-interest-rates-by-0-75-a-record/ The European Central Bank raised key rates by a record 75 basis points today and signaled further hikes, prioritizing the fight against inflation even as the eurozone economy heads for a probable winter recession. The ECB raised its deposit rate from zero to 0.75% and raised the main refinancing rate to 1.25%, its highest level […]]]>

The European Central Bank raised key rates by a record 75 basis points today and signaled further hikes, prioritizing the fight against inflation even as the eurozone economy heads for a probable winter recession.

The ECB raised its deposit rate from zero to 0.75% and raised the main refinancing rate to 1.25%, its highest level since 2011.

The increases come as inflation grows wider and was in danger of taking root.

Today’s increases come after the ECB raised rates by 50 basis points in July, its first increase in more than a decade.

Interest rate hikes will increase repayments for more than 400,000 tracker and variable mortgage holders here.

“During the next meetings, the Governing Council plans to raise interest rates further to dampen demand and guard against the risk of a persistent rise in inflation expectations,” the ECB said in a statement.

The move comes after weeks of solicitation by policymakers, with an apparent majority arguing for a 75 basis point hike and a few political doves trying to scale back expectations.

Markets, however, sided with the conservatives and priced an 80% chance of a 75 basis point move.

It came even as economists polled by Reuters were more evenly split, showing only a slight majority expecting a bigger move.

The sharp rise comes as the ECB raised its own inflation forecast and continues to see price growth well above its 2% target over its entire projection horizon.

“ECB staff have significantly revised their inflation projections upwards and inflation is now expected to average 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024,” added the ECB.

Conservatives feared that anything other than an oversized move signaled the ECB was not serious about its inflation-fighting mandate.

This risked pushing up already high long-term inflation expectations, which would signal a loss of confidence in the ECB.

Half-hearted action would also have weakened the euro, boosting inflation through more expensive energy imports.

The anticipation of rate hikes also allows the ECB to do most of the work before the recession sets in.

Attention now turns to ECB President Christine Lagarde’s press conference later this afternoon.

Christine Lagarde, President of the ECB

The European Central Bank also today cut its growth outlook for 2023 as the loss of cheap Russian gas will weigh on confidence, consumption and investment in the bloc.

The ECB has repeatedly underestimated inflation over the past two years as real price growth exceeded even its most pessimistic scenarios, raising questions about the credibility of the forecasts.

The bank now forecasts eurozone inflation at 8.1% this year from a forecast of 6.8% in June, while the price growth estimate for 2023 has been raised to 5.5% from 3 .5%.

In 2024, the last year of its projection horizon, inflation is expected at 2.3%, above its target of 2%.

The ECB now expects GDP growth to be 3.1% this year from 2.8% forecast in June, but it has cut its expansion forecast for 2023 to 0.9% from 2.1%.

Speaking ahead of today’s ECB decision, Trevor Grant, chairman of the Association of Irish Mortgage Advisors, said 285,000 tracker mortgage holders would be directly affected by an interest rate hike by the ECB.

“There are approximately 285,000 mortgage tracker customers in Ireland. For every 0.5% increase per €100,000 you owe, you can effectively expect to see your mortgage payments increase by €25 per And if rates increase by 0.75% for every €100,000, you can expect to see your repayments increase by €37 per month,” he said on Morning Ireland.

“It’s very hard to know what the average is because of mortgage terms and balances, but you’re going to see repayments go up basically, most people by at least $75 a month if the announcement of 0, 75% is announced. And obviously, the more the more the increase will be important”, he added.

He said there was a surprise in July when the 0.5% hike was announced by the ECB when a 0.25% increase was expected.

Mr Grant said it is unclear whether those looking to secure a mortgage will be affected by this upcoming increase.

“There are no more tracker mortgages available. Variable rates were not increased by the banks the last time there was an increase. This is because they are simply too high to anyway. And all the fixed rates for new customers weren’t affected,” he said.

He said more than 80% of new mortgage holders take out fixed rate mortgages for many reasons, including for security purposes.

John Finn, managing director of Treasury Solutions, said ECB rates are likely to top 2% over the next 12 months.

We need your consent to load this content rte-playerWe use rte-player to manage additional content which may place cookies on your device and collect data about your activity. Please check their details and accept them to load the content.Manage preferences

“We’ve had zero rates for so long. The new normal will be around 2% to 2.25%,” he told Morning Ireland.

He said he didn’t see much prospect of the ECB backtracking on rate hikes in the face of a deteriorating economic backdrop.

“We have had artificially low rates for so long and with inflation as high as it has been, even if it comes back to 3% or 4%, you still expect interest rates around 2 %, so I can’t see that happening,” he explained.

Mr Finn said he was surprised that major retail banks did not raise rates in response to the 0.5% interest rate hike announced by the ECB in July, but he said he expected them to move after today’s rate decision.

The only upside to rate hikes is that depositors can expect to withdraw money from their savings after many years of low or negative deposit rates.

“We are already seeing it. Big corporations were in charge of depositing their money. This has disappeared over the past few weeks. There is at least some light on the horizon for depositors,” he concluded.

]]>