short term – Sendika12 http://sendika12.org/ Fri, 18 Mar 2022 21:20:56 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://sendika12.org/wp-content/uploads/2021/10/profile-120x120.png short term – Sendika12 http://sendika12.org/ 32 32 Bank Of Hawaii Stock: Poised To Benefit From Higher Interest Rates (NYSE: BOH) https://sendika12.org/bank-of-hawaii-stock-poised-to-benefit-from-higher-interest-rates-nyse-boh/ Fri, 18 Mar 2022 20:49:34 +0000 https://sendika12.org/bank-of-hawaii-stock-poised-to-benefit-from-higher-interest-rates-nyse-boh/ Art Bet / E+ via Getty Images As recently covered First Hawaiian (FHB), Bank of Hawaii (NYSE: BOH) stocks have been fairly flat since the last coverage. The valuation didn’t really look convincing at the time, and with the post-COVID recovery also looking a bit lackluster, I guess a quiet period here shouldn’t be so […]]]>

Art Bet / E+ via Getty Images

As recently covered First Hawaiian (FHB), Bank of Hawaii (NYSE: BOH) stocks have been fairly flat since the last coverage. The valuation didn’t really look convincing at the time, and with the post-COVID recovery also looking a bit lackluster, I guess a quiet period here shouldn’t be so surprising.

Graphic
Data by YCharts

Although the bank’s operating performance has been a bit sluggish, we are seeing at least some growth in core lending, and interest rate hikes have also been very much in evidence since the start of this week. This should serve the bank well as we move forward into 2022, although I was a bit concerned that increasingly pessimistic economic growth forecasts would put a damper on this part of the story.

These stocks still don’t look cheap on common bank valuation metrics like normalized PE and P/TBV, but again, they rarely do. While I wouldn’t rule out the quiet period here continuing in the short term, and there are other headwinds to consider, “more of the same” can work very well in the long term, with return to mid-single-digit core earnings growth and a dividend yield of 3.35% sufficient to generate acceptable returns for dividend investors.

Results still a little pedestrian

The reported numbers continue to look a little weak, with revenue nearly flat sequentially at $168.9 million in the fourth quarter. Within this, net interest income (“NII”) decreased by a shade sequentially on a reported basis, primarily due to lower interest income from the Paycheck Protection Program as these loans continue to decline in the balance sheet.

Bank of Hawaii quarterly net interest income

Bank of Hawaii Quarterly Net Interest Income (Bank of Hawaii Quarterly Earnings Release)

Non-interest expense also increased, rising more than 5% sequentially and 3% year-on-year to $101.7 million in the fourth quarter, driving the efficiency ratio above 60% for the quarter.

With revenue still sluggish and expenses rising, quarterly operating income before provision (“PPOP”) was also predictable, falling 6% sequentially to $67.3 million. And that was pretty much the story for 2021 as a whole – rather weak income, due to a combination of low interest rates and sluggish non-interest income, facing spending higher operating. Unsurprisingly, PPPP for the full year was also low, as expected, at $275 million versus $306.9 million in 2020.

Bank of Hawaii quarterly operating profit before provision

Bank of Hawaii PPPO (Bank of Hawaii quarterly earnings release, author’s calculations)

The provisioning, however, continued to be a boon to net income, with the releases contributing $9.7 million to pretax profit in the fourth quarter and $50.5 million for the whole of year. This contributed to annual EPS of $6.25, compared to $3.86 in 2020.

Ongoing core loan growth

Although the numbers released by the bank make the recovery here a little slow, we are at least seeing signs of underlying growth. Core loans (i.e. excluding PPP balances) rose again for one, rising 2.8% sequentially and 6.2% year-on-year in the fourth quarter to 12.1 billion. dollars. It was also the third consecutive quarter of accelerating core loan growth – with core loans posting sequential growth of 2.4% and 1% in Q3 and Q2 respectively.

This resulted in a slight increase in the “base” NII (i.e. excluding PPP interest income and certain one-time charges), which increased 2.2% sequentially to $121.5 million in the fourth trimester. With PPP loan balances down to just $126.8 million at the end of last year (about 1% of total end-of-period loans), this run-off should present only a modest headwind. in 2022.

The economic recovery is fairly well established at this point, having experienced a slight wobble due to the impact of the Omicron wave on the state’s tourism economy. COVID restrictions are easing to the point of non-existence for domestic visitors, while the resumption of international travel is expected to accelerate later in the year. The state’s housing market also continues to look very strong. All told, I expect core loan growth (and subsequent NII growth) to show through in the results released this year.

Ready to benefit from higher interest rates

Loan growth should be a boon for the NII this year, but the bank will also see an increase in interest rates now that the tightening has really begun. Fixed rate loans make up a large part of the mix here (around 65%), but the bank has a very sticky deposit base which will give it the ability to capture higher margins. Moreover, a current loan-to-deposit ratio of 60% combined with the ongoing maturing of loans/investment securities suggests that it will have no problem recycling capital into higher-yielding assets.

The bank’s standard sensitivity disclosure indicates an immediate 100 basis point hike in rates, resulting in an annual rise of about 7.9% in the NII, with a more gradual change of the same magnitude resulting in an increase of 3. 1% of the NII.

Perspectives

While I expect to see tangible improvement in the NII based on a combination of loan growth and higher interest rates, there are some headwinds to consider, at least in the short term.

First, and like many banks, management expects a significant increase in annual operating expenses this year – somewhere in the 6% zone, as inflation ripples through wage growth and bank invests in technology. The latter should at least support future growth, but in the short term it will weigh somewhat on the PPPP and net profits.

Second, supply obviously won’t provide the same pop to the bottom line as last year. The bank’s allowance for credit losses is still about 30 basis points above immediate pre-COVID levels (1.29% vs. a “day 1” ACL of 0.99%), so there is room to maintain small impairment charges in the future, but vis-à-vis 2021 this line will obviously be a drag on net income and EPS this year.

Still a good choice for dividend investors

The immediate term might continue to be a little disappointing in terms of revenue, but that’s not something I see continuing in the medium term. On the one hand, the bank has always been very strong in terms of expense control, registering a CAGR of around 3% in the five years before COVID. Growth in operating expenses should moderate in 2023, returning to its historical trend thereafter. A corporate tax hike also seems out of place – something I was a bit cautious about last time.

With that, I expect annualized growth in the dividend per share of at least 5-6% over the next five years, consisting of the following:

  • Mid-single-digit annualized revenue growth, driven by mid-single-digit annualized loan growth, higher interest rates and modest non-interest revenue growth.
  • Operating expenses are expected to increase 6% in FY22, slow to 4% in FY23 and return to more moderate historical growth levels thereafter.
  • The above will lead to single-digit annualized PPOP growth – broadly in line with pre-COVID trends – with lower net income and EPS growth due to the normalization of provision levels from FY22, offset to a small extent by the cumulative effect of share buybacks (in the case of EPS).
  • The above will lead to EPS of around $7.40 by 2026, with a dividend payout ratio of around 50% – broadly in line with its historical level.

While not the most exciting outlook in the world, the above works out pretty well for income investors given the current yield of 3.35%. To buy.

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As the Fed begins raising interest rates, Americans should brace for pain https://sendika12.org/as-the-fed-begins-raising-interest-rates-americans-should-brace-for-pain/ Wed, 16 Mar 2022 00:39:13 +0000 https://sendika12.org/as-the-fed-begins-raising-interest-rates-americans-should-brace-for-pain/ Get the coronavirus nextThe next phase of our pandemic newsletter keeping you up to date with the latest developments as we enter a new normal. The Fed aims to lower inflation by reduce consumer spending and business owners who will find it more expensive to borrow. “The impact of a quarter-point hike is inconsequential, but […]]]>

The Fed aims to lower inflation by reduce consumer spending and business owners who will find it more expensive to borrow.

“The impact of a quarter-point hike is inconsequential, but the cumulative effect of six to ten interest rate hikes is a whole other ball game,” said Greg McBride, financial analyst in head of the financial information site Bankrate.com.

The consumer price index jumped 7.9% in February from a year earlier, the highest rate since 1982, after a spike in oil prices triggered by the invasion of Ukraine by Russia added to already rapidly rising prices caused by pandemic supply chain disruptions, pent up demand and government spending. High inflation is hitting American families and businesses hard, threatening the strong economic recovery from the pandemic.

Inflation is also a major political issue for President Biden, who said in his State of the Union address that “my top priority is to get prices under control.” Half of respondents in a Wall Street Journal poll released on Friday ranked inflation as the most important thing the president and Congress should tackle, double the second place of the war in Ukraine. And 63% of voters registered in the poll said they disapproved of Biden’s handling of inflation.

So there’s a lot at stake economically and politically as the Fed, the federal government’s main inflation fighter, takes its first step in what is going to be a months-long effort to try to rein in soaring oil prices. gas, groceries, cars, rent and other consumer expenses.

The Fed’s task is extremely difficult as it must determine how much to raise rates without slowing the economy to the point of falling into recession. The effort is inherent in the pain of average Americans, whom the Fed is trying to discourage from spending, said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, a global forecasting and analysis firm.

“You don’t want it to be a killer blow, but you definitely want it to pinch consumer spending,” she said of the interest rate hikes. “To slow it down, not turn it off completely.”

When the pandemic hit two years ago, the central bank cut its key federal funds rate to near zero to spur spending. This rate applies directly only to short-term loans between banks. But banks use it as a benchmark for personal and business loans, and it also affects longer-term loans, like mortgages.

In anticipation of Wednesday’s Fed hike, mortgage rates have already risen. The average 30-year fixed-rate loan was 4.42% on Tuesday, up more than 1 percentage point since the start of the year to the highest level since 2019, according to Mortgage News Daily.

Credit card interest rates will adjust within a billing statement or two of the Fed’s rate hike, McBride said. In the past, banks have also increased the interest rate they pay customers on their deposits. But the big banks are teeming with deposits and are unlikely to raise those rates much, if at all, he said. Federally insured online banks, which are more eager for customers, are a better bet to raise their interest rates on savings and checking accounts.

Stock prices are likely to fall because higher interest rates increase borrowing costs for businesses and make stocks a less attractive investment. Major equity indices have already fallen significantly in anticipation of Fed rate hikes, as well as in reaction to the war in Ukraine. McBride said investors should ride out the volatility and avoid panicking as stocks typically rise over the longer term.

“We have already seen this film. After the dotcom meltdown, after the Great Recession and even just after the onset of the pandemic, markets fell by a third in early 2020 and have since rallied and hit new highs after new highs,” did he declare. “Don’t try to guess the market. Play the long game.

Treasury yields have also risen in anticipation of Fed rate hikes, and that’s a problem for the federal government as it must continue to fund its $30 trillion national debt.

Last July, when many economists thought high inflation would only last a few months, the Congressional Budget Office predicted the US government would pay $306 billion in debt interest this year. But that forecast was based on the Fed not raising interest rates until the middle of 2023.

If interest rates rise just 1 percentage point higher than projected over the next decade, Congress will have to find an additional $187 billion a year to pay the extra interest on the debt, according to an analysis by the Committee for a Responsible Federal Budget, a budget watchdog group.

Jason Furman, a Harvard economist who served as chairman of the White House Council of Economic Advisers during the Obama administration, said inflation wasn’t so bad when it came to the national debt. This could help ease the burden over time by reducing the amount of debt relative to the size of the economy.

Overall, Furman said he’s not concerned that gradual interest rate hikes will significantly disrupt the economy or the United States’ ability to service debt. He noted that the Congressional Budget Office expects the main Fed to 2.6% by 2031, which is still historically low.

“The era of super low interest rates is coming to an end, but we could be in the era of super low interest rates for a while,” Furman said.

But after the federal government doled out trillions of dollars in pandemic aid on top of its massive debt, any hike in interest rates could make it harder for Congress and the White House to fund national priorities and respond. to future emergencies.

“The Great Recession and the pandemic were absolutely times we should have borrowed. It was the right thing to do,” said Maya MacGuineas, chair of the Committee for a Responsible Federal Budget. But the federal government continued to run large budget deficits when the economy was relatively strong between these two efforts.

Now the inflated interest payments on the national debt will prevent Congress and the White House from providing fiscal stimulus if the Fed’s inflation-fighting efforts push the economy to the brink of recession, MacGuineas said.

“There was a kind of senseless naivety about people who were saying in recent years, ‘Don’t worry, we can borrow because interest rates will never go up,'” she said. “Never is a long time. And now, never is here.


Jim Puzzanghera can be contacted at jim.puzzanghera@globe.com. Follow him on Twitter: @JimPuzzanghera.

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Will a debt consolidation loan affect my credit rating? https://sendika12.org/will-a-debt-consolidation-loan-affect-my-credit-rating/ Tue, 08 Mar 2022 18:09:05 +0000 https://sendika12.org/will-a-debt-consolidation-loan-affect-my-credit-rating/ 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 who pay us for our services, all opinions are our own. (The Credible Money Coach explains the possible […]]]>

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 who pay us for our services, all opinions are our own.

(The Credible Money Coach explains the possible credit impact of a debt consolidation loan.)

Dear Credible Money Coach,

Is it true that when you take out a debt consolidation loan, it hurts your credit? —Twila

Hello Twila and thank you for your question. Debt consolidation affects your credit differently depending on how you structure it and manage loan repayments. This can be a smart way to manage multiple high interest debts without hurting your finances.

If you’re considering a personal loan for debt consolidation, compare rates from multiple lenders to get the best deal. Credible, it’s easy to view your prequalified personal loan rates in minutes.

Why do people consolidate their debts?

When you consolidate debt, you open a new credit account, such as a personal loan, credit card, or home equity loan, to repay several existing debts. This leaves you with one payment instead of multiple accounts to manage.

If you have good credit, you may be able to get an interest rate that’s lower than the combined effective rate you’re paying on multiple debts. This saves money in the long run.

Ways to Consolidate Debt

There are several options for consolidating debt, including:

Each of these options has advantages and disadvantages. For example, personal loan interest rates are generally lower than credit card rates. But if you continue to incur credit card charges, you could go into more debt.

Doing a 0% balance transfer could save you interest for 12 months or more. But if you don’t repay the entire balance before the end of the promotional period, the interest rate could increase significantly.

If you sign up for a debt management plan with a credit counselor, they can negotiate with your creditors to pay less than you owe, lower your interest rate, or extend your repayment period. But if you can’t repay a debt management plan as agreed, your credit may suffer.

The risks of a loan buy-back

A debt consolidation loan can lower your credit scores in the short term. This is because new credit applications cause your scores to drop. And if you use the loan to pay off a credit card and then close it, you reduce your total available credit, which leads to lower credit scores. (It’s best to keep a paid credit card open so you have more credit available in your name.)

However, if you make your new loan payments on time each month, your credit should recover fairly quickly from the slight hit it took when you opened the loan.

Should you get a debt consolidation loan?

A debt consolidation loan is not for everyone. I advise you to think twice before emptying a retirement account to pay off debt or putting your home at risk with a home equity loan or line of credit.

And if bad spending habits are causing your debt, working with a qualified credit counselor to improve your financial habits may be more helpful than lowering your interest rate with a debt consolidation loan.

If you decide a personal loan is right for you, Credible can help. compare personal loan rates from multiple lenders without hurting your credit.

Ready to know more? Check out these articles…

Need Credible® advice for a money-related question? Email our credible financial coaches at moneyexpert@credible.com. A Money Coach could answer your question in a future column.

This article is intended for general information and entertainment purposes. Use of this site does not create a professional-client relationship. Any information found on or derived from this website should not replace and should not be taken as legal, tax, real estate, financial, risk management or other professional advice. If you require such advice, please consult a licensed or competent professional before taking any action.

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About the Author: Laura Adams is a personal finance and small business expert, award-winning author and host of silver girl, a weekly audio podcast and top notch blog. She is frequently quoted in the national media and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her work as a speaker, spokesperson and advocate. She earned an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, instagram, Facebook, Twitterand LinkedIn.

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Can rising interest rates really control inflation? https://sendika12.org/can-rising-interest-rates-really-control-inflation/ Sat, 05 Mar 2022 18:00:00 +0000 https://sendika12.org/can-rising-interest-rates-really-control-inflation/ Sun, Mar 6, 2022 12:00 a.m. Last updated on: Sun, Mar 6, 2022, 12:00 a.m. Treating inflation with high interest rates is like treating cancer with chemotherapy. You have to kill swathes of the economy to slow things down. Illustration: Collected “> Treating inflation with high interest rates is like treating cancer with chemotherapy. You […]]]>

Treating inflation with high interest rates is like treating cancer with chemotherapy. You have to kill swathes of the economy to slow things down. Illustration: Collected

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Treating inflation with high interest rates is like treating cancer with chemotherapy. You have to kill swaths of the economy to slow things down. Illustration: Collected

Russia’s military attack on Ukraine has unquestionably unbalanced the global economy. The newspapers are full of stories about the long-term impact of this war. Obviously, I share many of the dire predictions being made, but for this article I have chosen to address another equally burning and long-term issue: the role of rising interest rates. In simple terms, it revolves around the question, “How high should the interest rate rise to curb inflation?”

We know that the rate of interest determines the price of holding or lending money. Banks pay an interest rate on savings to attract depositors. Banks also receive an interest rate for money lent from their deposits. When interest rates are low, individuals and businesses tend to borrow more from banks, thereby increasing the money supply. As a result, inflation rises. On the other hand, higher interest rates tend to lower inflation.

For all the latest news, follow the Daily Star’s Google News channel.

Although this is a very simplified version of the relationship, it highlights why interest rates and inflation tend to be inversely correlated.

Economists are increasingly concerned that the interest rate borrowers are paying will soon skyrocket and short-circuit the post-pandemic economic recovery. So why is the interest rate going up? How does it affect other macroeconomic variables, notably the price level? Can rising interest rates really curb inflation? I cannot answer all of these questions here for lack of space, but I hope to pique the interest of readers so that they can delve deeper into the puzzle over time.

A central bank can use changes in interest rates as a tool to fight inflation. It does this by fixing the commercial banks’ short-term borrowing rate – known as the repo rate in Bangladesh – and then these banks pass it on to consumers and businesses. This rate influences everything from credit card interest to mortgages and auto loans, making borrowing more expensive. On the other hand, it also increases savings and certificate of deposit (CD) rates and encourages saving.

In times of inflation, a central bank aims to make borrowing more expensive so that consumers delay their purchases, which dampens demand and controls prices. The biggest challenge is finding the right level so as not to raise it too high, which will stifle investment and hurt the poor.

As we see now, interest rates in countries around the world are rising after a lull in recent years. The Bank of England has started raising interest rates from historic pandemic lows and is under increasing pressure to raise the bank rate again. The US Federal Reserve is expected to begin raising the benchmark rate, known as the funds rate, at the next Board of Governors meeting on March 15-16. The European Common Bank may selectively raise rates, and there is no doubt that Asian countries will follow, although there may be a slight lag.

The novelty of this upward trend is that many central banks in North America and Europe have cut their respective interest rates to near-zero levels in an effort to meet the maximum stability targets for the economy. employment and prices. Unfortunately, inflation has recently spiked due to rising demand and supply chain bottlenecks. Central banks have now decided to curb aggregate demand and money supply to ease inflationary pressures.

The crucial question here is whether the observed movement in the two variables – interest rate and inflation – exhibits causality, or is it just coincidence? The question is immediately relevant: will the simple increase in the interest rate bring down the rate of inflation? Also, how high and how fast must the interest rate rise to have an impact on inflation? For example, if necessary, can the Fed raise interest rates to 5%, 10% or, as in the 1980s, 20%? Is it even calculable or predictable in advance? The answer to these questions is no.

Raghuram Rajan, former chief economist of the IMF and governor of the Reserve Bank of India, called interest rates a “brutal” tool in a situation where the real culprit is the creaky supply chain. The interest rate is a blunt tool also because aggregate price indices do not tell us precisely what prices are changing, for what reasons or to what effect.

“The government should take steps to protect the poorest through tougher price caps and direct financial support, while increasing investment in green projects to end our exposure to fossil fuel price volatility. and curbing demand from those who can afford it through wealth taxes,” Rajan said. adds.

Of course, it will take some time before any action taken by a central bank will have an impact on the economy and curb inflation. That’s why policymaking groups need to watch economic data carefully to decide how much and how often to raise rates.

And the biggest challenge is finding the optimal level of interest rate increases without plunging the economy into a slump. Treating inflation is like treating cancer with chemotherapy, as one expert once said. “You have to kill chunks of the economy to slow things down. It’s not nice treatment.”

Dr Abdullah Shibli is a senior research fellow at the US-based International Institute for Sustainable Development (ISDI).

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What are the interest rates? How do they work? https://sendika12.org/what-are-the-interest-rates-how-do-they-work/ Mon, 28 Feb 2022 20:29:13 +0000 https://sendika12.org/what-are-the-interest-rates-how-do-they-work/ Interest is the price you pay to borrow money. Stocksnap from Pixabay; Cloth What are the interest rates? Contents When people need to finance major purchases like a house or car, start a business, or pay school fees, they often turn to their bank for a loan. These loans can be short-term, lasting only a […]]]>

What are the interest rates?

When people need to finance major purchases like a house or car, start a business, or pay school fees, they often turn to their bank for a loan. These loans can be short-term, lasting only a few months, but they can also be longer-term, such as mortgages, which have terms of up to 30 years.

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As the Reserve Bank raises interest rates, vodka could be the answer https://sendika12.org/as-the-reserve-bank-raises-interest-rates-vodka-could-be-the-answer/ Sat, 26 Feb 2022 16:00:00 +0000 https://sendika12.org/as-the-reserve-bank-raises-interest-rates-vodka-could-be-the-answer/ Damien Grant is an Auckland business owner, member of the Taxpayers Union and regular opinion contributor for Stuff. OPINION: Imagine that you are the vodka commissar of the People’s Republic of Donbass. Your task is to ensure the distribution of vodka to the citizens of the nation. Your mandate is to reach an average level […]]]>

Damien Grant is an Auckland business owner, member of the Taxpayers Union and regular opinion contributor for Stuff.

OPINION: Imagine that you are the vodka commissar of the People’s Republic of Donbass.

Your task is to ensure the distribution of vodka to the citizens of the nation. Your mandate is to reach an average level of vodka consumption between 1 and 3 liters per adult annually.

Over the past year, however, there has been a malaise in the national psyche. In response, you decided to increase the availability of vodka to boost national morale. Voluntary pun.

Subsidized vodka for everyone! Consumption has increased and is now at 6 liters per person. It certainly lifted the nation’s mood, but the resulting rational exuberance proves disruptive. It’s time to bring down the level of consumption.

READ MORE:
* Adrian Orr suggests the Reserve Bank is ‘incredibly worried’ about inflation
* The Reserve Bank raises the official exchange rate by 25 basis points and now sees the rate climbing to around 3.4%
* Adrian Orr says Reserve Bank has ‘small role’ in unsustainable house prices

Alas, you discover a problem. In the past, vodka consumption was evenly distributed. Today, most consumption is concentrated among a small percentage of the population, as some citizens have reacted aggressively to the supply of cheap alcohol.

You accelerate a resolution by liquidating those who have consumed too much. It’s a bit drastic, and as a result, you can expect to be fired as the state seeks to restore faith in the vodka market.

Reserve Bank Governor Adrian Orr.  Reserve Bank Governor Adrian Orr's approach to monetary policy leaves him no leeway now that we are facing a crisis, says Damien Grant.

Robert Kitchin / Stuff

Reserve Bank Governor Adrian Orr. Reserve Bank Governor Adrian Orr’s approach to monetary policy leaves him no leeway now that we are facing a crisis, says Damien Grant.

Now you might be wondering, that was a great story, but what does that have to do with Adrian Orr?

When Don Brash – not to be confused with Donbass, but the literary allusion was too tempting – was tasked with reducing inflation, nearly 74% of the population owned their homes. Today, that figure is at least 10% lower.

Brash managed to defeat inflation by reducing the purchasing power of those with floating mortgages. This pain was spread over no less than half of all households. A drop in demand followed and reduced spending put downward pressure on prices.

Orr faces a different set of facts.

Someone who bought a house before 2016 enjoyed at least a doubling of the value of their property and, thanks to historically low interest rates, a large part of the repayments would have gone to reducing the principal.

Those who have bought in the past few years will have paid dearly and borrowed so much that many of them are now walking stooping. As Orr increases the cost of borrowing, it’s those unfortunate few who are going to be liquidated, while the rest of us are largely unaffected.

It is possible that the rise in interest rates will not have a short-term effect on businesses either. For most companies, servicing debt is only a small part of their total expenses and although a rise in rates will reduce new investment, this effect will take years to trickle down to demand.

The era of cheap interest rates is about to end and with it the fortunes of those who once enjoyed “cheap rates”.

Kavinda Herath/Stuff

The era of cheap interest rates is about to end and with it the fortunes of those who once enjoyed “cheap rates”.

Perhaps the Reserve Bank understands this and can explain why the OCR hike was only a nominal 0.25% instead of the 0.5% some were expecting. Or maybe it was another misstep in a long series of missteps.

More importantly, the bank announced that it would not renew the large-scale asset purchases it made at the start of the pandemic.

The assumption, at least mine, was that these debts would be rolled over, meaning they were never to be repaid until inflation reduced their face value to the price of a single Ukrainian hryvnia.

Orr put the Treasury under pressure. The maturities of these loans are staggered over the coming decades, with the tail ending in 2041. However, seven and a half billion are due in April next year and five billion in May 2024.

In order to meet these repayments, Grant Robertson, and perhaps Simon Bridges after him, will have to either raise taxes, cut spending, or borrow on the open market. This is a problem because large budget deficits are expected in the years to come.

This means that the Crown will have to borrow not only to cover its current deficit, but also for the $53 billion owed to the central bank.

As the Treasury seeks funding, it will pay market rates for its sovereign debt. As a result, New Zealand is going to experience higher interest rates for longer and the cost of this is going to be spread unevenly among those who responded to the incentives created by the bank.

Asked last Thursday by Epsom MP David Seymour, Orr blithely replied that “we don’t target house prices, we target consumer price inflation”.

“We lowered interest rates to achieve what we had done. Whether people want to use this to buy and sell assets is the choice between them and the financial institutions.

The problem, Governor, is that these individuals responded to the incentives created by your institution and now they are the ones who will pay the price for what is widely perceived as a massive mistake.

National revenue spokesman Andrew Bayly suggested the RBNZ's approach to quantitative easing was among the most aggressive in the OECD.

ROBERT KITCHIN/Stuff

National revenue spokesman Andrew Bayly suggested the RBNZ’s approach to quantitative easing was among the most aggressive in the OECD.

Opposition spokesman Andrew Bayly quizzed the governor on how we appear to be the second most aggressive country in the OECD on quantitative easing, but again Orr dodged responsibility , highlighting the dire economic situation he faced in March 2020.

It does not make sense. Orr began easing monetary conditions in May 2019, nearly a year before the pandemic hit, leaving him with little room to react in a crisis. There is near consensus that he overreacted when the crisis hit.

Economic consultancy Infometrics echoes the views of most commentators when advising its corporate clients: “Our view is that the Reserve Bank has lost control of inflation, with real costs climbing. soaring (and) rising inflation expectations…”

In his monetary policy statement, Orr did not even acknowledge that his quantitative easing policy is responsible for the price spike in the non-tradable sector; goods and services produced and sold in New Zealand.

An effective central bank is a credible bank that has the confidence of the market.

This governor appears unable or unwilling to admit past mistakes and hampers the bank’s ability to fulfill its regulatory function. He should resign.

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Unmicron Technology: The amount of new loans financed by the company reaches NT$10 million and is more than 2% of the net worth shown in the latest financial report. https://sendika12.org/unmicron-technology-the-amount-of-new-loans-financed-by-the-company-reaches-nt10-million-and-is-more-than-2-of-the-net-worth-shown-in-the-latest-financial-report/ Tue, 22 Feb 2022 14:02:13 +0000 https://sendika12.org/unmicron-technology-the-amount-of-new-loans-financed-by-the-company-reaches-nt10-million-and-is-more-than-2-of-the-net-worth-shown-in-the-latest-financial-report/ Declaration 1.Date of occurrence of the event:2022/02/22 2.Funding recipient name, relationship with lender, lending limit (thousand NTD), starting outstanding balance (thousand NTD), new loan (thousand NTD), is it part of a scheduled allocation or revolving limit for the same recipient that the chairman is authorized by the board of directors to allocate, outstanding balance (thousand […]]]>

Declaration

1.Date of occurrence of the event:2022/02/22
2.Funding recipient name, relationship with lender, lending limit
(thousand NTD), starting outstanding balance (thousand NTD), new loan
(thousand NTD), is it part of a scheduled allocation or revolving limit for
the same recipient that the chairman is authorized by the board of directors
to allocate, outstanding balance (thousand NTD) up to the date of
occurrence, reason for new loan (thousand NTD):
(1)Funding recipient name:SMART IDEA HOLDINGS LIMITED
(2)Relationship with lender:The Company's subsidiary
(3)Lending limit (thousand NTD):24,285,425
(4)Starting outstanding balance (thousand NTD):2,030,130
(5)New loan (thousand NTD):1,473,930
(6)Is it part of a scheduled allocation or revolving limit for
the same recipient that the chairman is authorized by
the board of directors to allocate:Yes
(7)Outstanding balance (thousand NTD) up to the date of occurrence:3,504,060
(8)Reason for new loan (thousand NTD):
For the short-term working capital needs of loan recipient.
3.For collaterals provided by the loan recipient, the content and the value
(thousand NTD):None
4.For the latest financial reports of the loan recipient, the capital
(thousand NTD) and the cumulative gains/losses(thousand NTD):
SMART IDEA HOLDINGS LIMITED:1,971,817/5,612,134
5.Method of calculation of interest:
The principal and interest of the loan are paid off at once,
the interest rate of the loan is not less than the Company's funding cost.
6.For repayment, the condition and the date:
Repay the loans and interests when the loan is due;
the due date of the loan is one year from the loan's contract date.
7.The amount of monetary loans extended to others as of the date of
occurrence (thousand NTD):9,794,202
8.The total amount of monetary loans extended to others as a percentage of
the public company's net worth on the latest financial statements as of the
date of occurrence:16.13
9.Sources of funds for the company to extend monetary loans to others:Others.
10.Any other matters that need to be specified:
(1) The Sources of funds for the company to extend monetary loans to others
is the Company's own funds, and borrows from the bank if insufficient.
(2) The new total loans and loans to a single subsidiary
are still within the limits by regulation.
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Low real interest rates support asset prices, but rising risks https://sendika12.org/low-real-interest-rates-support-asset-prices-but-rising-risks/ Sun, 20 Feb 2022 04:18:08 +0000 https://sendika12.org/low-real-interest-rates-support-asset-prices-but-rising-risks/ Supply disruptions coupled with strong demand for goods, rising wages and rising commodity prices continue to challenge economies around the world, pushing inflation above central bank targets . To contain price pressures, many economies began to tighten monetary policy, causing nominal interest rates to rise sharply, with long-term bond yields, often an indicator of investor […]]]>

Supply disruptions coupled with strong demand for goods, rising wages and rising commodity prices continue to challenge economies around the world, pushing inflation above central bank targets .

To contain price pressures, many economies began to tighten monetary policy, causing nominal interest rates to rise sharply, with long-term bond yields, often an indicator of investor sentiment, returning to pre- pandemic in certain regions such as the United States. states.

Investors often look beyond nominal tariffs and base their decisions on real rates, i.e. inflation-adjusted rates, which help them determine the return on assets. Low real interest rates encourage investors to take more risk.

Despite somewhat tighter monetary conditions and the recent uptrend, longer-term real rates remain deeply negative in many regions, supporting higher prices for riskier assets. Further tightening may still be needed to bring inflation under control, but this puts asset prices at risk. More and more investors could decide to sell risky assets because these would become less attractive.

Different perspectives

While short-term market rates have risen since central banks’ hawkish turn in advanced economies and some emerging markets, there is still a clear difference between policy makers’ expectations about when their benchmark rates will rise and where investors expect the crunch to end.

This is particularly evident in the United States, where Federal Reserve officials expect their main interest rate to hit 2.5%. That’s more than half a point higher than 10-year Treasury yields indicate.

This divergence between the views of markets and policymakers on the most likely path for borrowing costs is important because it means that investors can adjust their expectations of upward Fed tightening at a time more far and faster.

In addition, central banks could tighten more than they currently expect due to the persistence of inflation. For the Fed, this means that the main interest rate at the end of the tightening cycle could exceed 2.5%.

Implications of Debit Path Splitting

The path of policy rates has important implications for financial markets and the economy. Due to high inflation, real rates are historically low, despite the recent rebound in nominal interest rates, and are expected to remain so. In the United States, long-term rates are hovering around zero while short-term yields are deeply negative. In Germany and the United Kingdom, real rates remain extremely negative on all maturities.

interest rate

These very low real interest rates reflect pessimism about economic growth in the years to come, the global glut of savings due to aging societies and the demand for safe assets in a context of heightened uncertainty exacerbated by the pandemic and recent geopolitical concerns.

Unprecedented low real interest rates continue to boost riskier assets, despite the recent uptrend. Low real long-term rates are associated with historically high price-to-earnings ratios in equity markets, as they are used to discount expected future growth in earnings and cash flow. All other things being equal, the tightening of monetary policy should trigger an adjustment in real interest rates and lead to a rise in the discount rate, leading to a decline in stock prices.

Despite the recent tightening of financial conditions and worries about the virus and inflation, global asset valuations remain stretched. In credit markets, spreads are also still below pre-pandemic levels despite a slight recent widening.

After a banner year supported by strong earnings, the US stock market entered 2022 with a steep decline amid high inflation, growth uncertainty and a weaker earnings outlook. Therefore, we anticipate that a sudden and substantial rise in real rates could lead to a significant decline in US equities, especially in highly valued sectors like technology.

Already this year, the real 10-year yield has risen by almost half a percentage point. Stock volatility soared on heightened investor jitters, with the S&P 500 falling more than 9% for the year and the Nasdaq Composite measure dropping 14%.

Impact on economic growth

Our growth at risk estimates, which link downside risks to future economic growth to macro-financial conditions, could rise significantly if real rates suddenly rise and financial conditions tighten. Easy conditions have helped governments, consumers and businesses around the world weather the pandemic, but that could reverse as monetary policy tightens to curb inflation, moderating economic expansions.

In addition, capital flows to emerging markets could be threatened. Equity and bond investments in these economies are generally considered less safe, and tighter global financial conditions may lead to capital outflows, particularly for countries with weaker fundamentals.

Going forward, with persistent inflation, central banks are faced with a balancing act. Meanwhile, real interest rates remain very low in many countries. The tightening of monetary policy must be accompanied by some tightening of financial conditions. But there could be unintended consequences if global financial conditions tighten significantly.

A larger and sudden increase in real interest rates could lead to a disruptive revaluation of prices and an even larger sell-off in equities. Given that financial vulnerabilities remain elevated in several sectors, monetary authorities should provide clear guidance on the future direction of policy to avoid unnecessary volatility and preserve financial stability.

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Raising interest rates is fucking the workers https://sendika12.org/raising-interest-rates-is-fucking-the-workers/ Wed, 09 Feb 2022 20:12:27 +0000 https://sendika12.org/raising-interest-rates-is-fucking-the-workers/ With inflation above 5% for the first time since the financial crisis, policymakers are perplexed. The orthodox response to high inflation is to raise interest rates. The increase in the cost of borrowing is supposed to reduce spending and investment, thereby reducing the pressure on resources that can drive up prices when the economy is […]]]>

With inflation above 5% for the first time since the financial crisis, policymakers are perplexed. The orthodox response to high inflation is to raise interest rates. The increase in the cost of borrowing is supposed to reduce spending and investment, thereby reducing the pressure on resources that can drive up prices when the economy is growing rapidly.

But inflation is not always caused by high rates of economic growth colliding with limited resources. It can be caused by anything that generates a sudden imbalance between demand and supply for a particular product. Today, these raw materials are fossil fuels.

Rising oil and natural gas prices – a legacy of a pandemic in which economic activity, and therefore fuel consumption, fell to very low levels leading to a reduction in supply – are impacting on the prices of almost all other commodities. This domino effect has been particularly evident in the food sector due to the important role of fertilizers derived from natural gas.

The result has been a particularly sharp rise in inflation of imports of food, fuel and other consumer goods into the UK – exacerbated by disruptions to supply chains also caused by the pandemic. This type of inflation mainly affects the poor, and almost 5 million people are now struggling to feed themselves in the UK due to rising prices.

This unusual situation raises an important question: what are policymakers supposed to do when inflation is high, but growth and investment are weak?

Similar questions were asked in the 1970s, just at the dawn of the neoliberal revolution. In the UK, growth and investment were weak but inflation was high, again due to higher energy prices resulting from the formation of the Organization of the Petroleum Exporting Countries ( OPEC).

The breakdown of the relationship between employment and inflation that occurred during this period is now considered the death knell of the Keynesian consensus. Since inflation was not fueled by strong demand, it could not simply be solved by cutting government spending, raising interest rates, or negotiating wage moderation with the unions. The problem was energy.

Naturally, this fact gave workers in the energy sector much more power. Miners in particular organized themselves during this period to obtain wage increases and stem the decline of their industry.

At the same time, neoliberal economists have sought to use the “stagflation crisis” as an opportunity to destroy the last vestiges of the social democratic accord. They argued that inflation was fueled by irresponsible governments pumping too much money into the economy and failing to confront overly militant trade unionists demanding higher wages.

Divergent interpretations of the crisis led to an epic confrontation between capital and labor that culminated in the Winter of Discontent, the introduction of a three-day week and, ultimately, the election of Margaret Thatcher .

Thatcher immediately set out to institutionalize the neoliberal view of inflation by drastically raising interest rates. Neoliberals argued that inflation was “always and everywhere a monetary phenomenon”: in other words, when prices rose, it was because governments had lost control of the money supply. Raising interest rates—along with cutting government spending—would discourage borrowing and therefore limit money supply growth.

This theory never worked in practice. Thanks to financial deregulation, borrowing under Thatcher grew faster than at any time in history. But the drastic rise in interest rates was never intended to reduce the money supply – it was meant to create a recession that would discipline organized labor.

Monetarism quietly fell out of favor among central bankers during the 1980s as it became clear that there was no easy way to use interest rates to control the money supply. But Thatcher’s interest rate shock – echoed by the Volcker shock that took place in the United States – is remembered as a necessary and decisive step to stem the “wage-price spiral” of the 1970s.

Thatcher may have ended the slump of the 1970s, but she did it by plunging millions into poverty and creating an economy that worked for a small elite in southern England. Much of the political and economic turmoil we are experiencing today can be traced back to decisions made under his government.

In addition, inflation ended up falling in the long term due to the stabilization of oil prices, which would have happened anyway with the normalization of OPEC’s role in global energy markets.

Thatcher’s singular achievement was not in figuring out how to use monetary policy to bring inflation down; it was about figuring out how to use monetary policy to discipline the working class. Today, his descendants are trying to do the exact same thing.

Proponents of higher interest rates know that the problem we face is not the overheating of the economy, but the fallout from the shock of rising energy prices. Making borrowing more expensive will only further constrain a stagnant economy, dampening consumption and investment – ​​and therefore wages and job creation.

But just like in the 1980s, capital must discipline labor in order to protect profits. Some workers have had lots of paid time off or spent more time working from home and don’t want to return to the dismal working conditions of the pre-pandemic years.

Others have been less fortunate, spending recent years earning meager wages in dangerous conditions. But many of these workers are organizing – we are seeing an uptick in union membership and activity that could begin to reverse a decades-long decline.

We are unlikely to see Thatcher-style monetary shock therapy again. Apart from anything else, the unions remain in such a weak position that a dramatic hike in interest rates (as opposed to the one recently announced) is an unnecessary tactic given the chaos it would cause.

But the right is already trying to spread a narrative that blames workers for the current rise in inflation to justify a disciplinary response from the state. Just look at the Governor of the Bank of England’s plea for wage moderation (which has been rightly ridiculed since it emerged he was earning over half a million pounds a year).

One of the few ‘problems’ that the British economy insists on not the face is inflated salaries. British workers have experienced the longest period of wage stagnation since the 1800s. And while there have been post-pandemic wage increases in some sectors associated with shortages, these have been limited and are likely to be temporary, as workers respond by filling in the gaps.

The latest analysis from the Trades Union Congress (TUC) shows that weekly wages are now £3 lower than at the time of the financial crash of 2008. The general trajectory of wages after the pandemic is not yet clear, but early indicators suggest that wage growth – especially in lower-paying sectors – is returning to pre-pandemic levels.

In this context, the rise in interest rates will have two effects. First, it will increase the impact of inflation on poorer households by making their borrowing more expensive. In fact, it threatens to push millions of families into debt.

Second, it will discourage investment in an economy where business investment was already dangerously low before the pandemic began. This will translate into fewer jobs, lower productivity and lower long-term wage growth.

In other words, higher interest rates will mean an even lower standard of living for the millions already badly hit by high inflation. Moreover, they will not have an impact on inflation until energy prices fall, which will only happen with an increase in supply.

Rather than raising interest rates, we should argue for short-term price controls and public support for the supply of long-term necessities – perhaps through something like a national food service.

Investing in renewable energy is essential for many reasons: keeping prices low, maintaining energy security, decarbonizing, creating jobs and recovering from the pandemic.

Inflation is always political – inflation itself and the response to it benefits some groups and harms others. We cannot allow the right to get away with blaming workers for a set of problems caused by capital.

After all, we wouldn’t be facing this problem if previous governments had taken the need to invest in renewable energy sources seriously. And energy companies like Exxon Mobil and BP are posting windfall profits due to rising oil and natural gas prices.

Workers have borne the cost of every crisis for at least the past fifty years – they cannot and will not have to bear all the costs of this one.

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What to know about flexible loans and how they work https://sendika12.org/what-to-know-about-flexible-loans-and-how-they-work/ Wed, 02 Feb 2022 19:21:11 +0000 https://sendika12.org/what-to-know-about-flexible-loans-and-how-they-work/ 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 who pay us for our services, all opinions are our own. Flexible loans are convenient, but can come […]]]>

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 who pay us for our services, all opinions are our own.

Flexible loans are convenient, but can come with high costs. (Shutterstock)

If you’ve ever needed instant access to cash to cover an immediate financial emergency, you may have wondered what type of loan could help you. Flexible loans are easy to get, even if you have bad credit. Unfortunately, they usually come with very high interest charges, regardless of the length or amount of the loan.

Let’s take an in-depth look at how flexible loans work, their pros and cons, and how they compare to quick cash alternatives like a personal loan from an online lender.

What is a flexible loan?

A flexible loan is not like a normal personal loan – in fact, it is not a loan at all. Flexible loans are unsecured personal lines of credit that work much like a credit card. But they tend to be more expensive than credit cards.

Flexible loans offer two key benefits: if your credit is weak or limited, you can usually get a flexible loan and you can receive funds immediately. You might consider a flexible loan when you need cover an urgent expense and are unable to obtain a Personal loan.

Flexible loans usually come from cash advance establishments and online lenders. Some banks and credit unions may offer flexible loans, but keep in mind that they may refer to a personal loan as a “flexible loan”. Personal loans are not lines of credit.

How do flexible loans work?

When you take out a flexible loan, the lender gives you access to a line of credit. You use this credit as needed and make a payment each month until you pay off the balance. You can choose to pay only the minimum, pay extra, or pay in full each month. Flexible lenders charge interest only on the amount you borrow and any balance you carry from month to month.

Although lenders do not charge additional fees – such as loan origination fees – the annual percentage rates for flexible loans tend to be very high, making them a more expensive option compared to other short-term loans.

What can you use a flexible loan for?

Like personal loans, flexible loans can be used for any purpose. But many borrowers use smaller flexible loans to bridge the gap if they have big monthly bills, unexpected car repairs, or medical bills due between paychecks.

Due to their very high APRs, flexible loans should really only be an option when you can’t cover an emergency cost in a cheaper way.

How much can you borrow with a flexible loan?

All loan amounts and terms will be unique to the lender you choose. Typically, however, flexible loans can cost as little as $100 up to several thousand dollars.

Similar to credit cards and personal loans, borrower approval will depend on a number of factors. Some lenders may require proof of citizenship, employment, bank account, and that you are 18 or older.

How much do flexible loans cost?

Flexible loans typically come with very high interest rates and fees that can reach APRs of 200% or more. In contrast, credit card and personal loan APRs are typically only in the double digits, even for borrowers with poor credit. Since the APR encompasses both the interest rate and the fees associated with the loan, it is a better indicator of the true cost of a credit product.

The overall costs of flexible loans depend on the amount you borrow, the interest rate, and how long it takes you to pay it back. As with any type of revolving credit, if you only make the minimum payment each month, repayment of the loan may take longer.

Before taking out a flexible loan, be sure to check personal loan rates. Some lenders offer loans to people with less than perfect credit, and online lenders can often provide next business day financing.

Flexible loans vs credit cards

Although both are revolving lines of credit, credit cards have some advantages over flexible loans. A credit card can have a higher maximum credit amount than a flexible loan. And while credit card interest rates are generally higher than personal loan interest rates, they’re still significantly lower than typical flexible loan APRs. But it can be difficult to qualify for a credit card if you have little or no credit history.

Flexible Loans vs Payday Loans

Payday loans are short-term, high-interest loans that must be repaid on the borrower’s next payday. APR for payday loans can be 390% or more, according to the Consumer Financial Protection Bureau. This is significantly higher than typical flexible loan APRs. For payday and flexible loans, if you pay late, the lender will assess fees which can be high.

Advantages and disadvantages of flexible loans

All financial products have advantages and disadvantages. It is important to weigh the pros and cons before committing to a flexible loan.

Advantages

  • It’s usually easy to qualify for a flexible loan, and most borrowers can get one even with poor or limited credit history.
  • Loan approval is usually fast and the release of funds is just as fast.
  • Unlike a traditional loan, you can continue to access your line of credit after the first withdrawal. This allows you to access more funds in an emergency.

The inconvenients

  • High APRs make flex loans a very expensive form of credit.
  • If you only pay the minimum each month, interest and fees can pile up, pushing you into expensive and hard-to-pay debt.
  • Access to an unsecured open line of credit could tempt you to overspend.

Alternatives to flexible loans

Flexible loans aren’t the only option if you need money fast and your credit is weak. Before committing to a high-cost credit product, consider these alternatives:

  • Personal loans for bad credit — Personal loans for bad credit are fixed rate loans for borrowers with lower credit ratings. Although a bad credit score may earn you a higher interest rate than a good credit score, a personal loan with bad credit usually has a much lower APR than a credit card or credit card. a flexible loan.
  • Auto Repair Loans — These loans are used to cover car repairs and are spread in a lump sum. No collateral is required for these unsecured loans. Borrowers who need to cover repair costs while waiting for insurance settlements might choose this over a flexible loan.
  • Credit-generating loans — Credit-building loans are designed to help borrowers with poor or no credit history build credit responsibly. Instead of getting the money up front, however, you get the loan back after making a certain number of payments. Credit-generating loans often repay at the end of the loan term, so they may not be a good option if you need cash immediately to cover an unexpected expense.
  • Short-term loan – Short-term loans require little or no collateral and have shorter repayment terms. Although they require a credit check, lower annual interest rates and faster repayment terms offer borrowers a responsible way to obtain funds and get out of debt quickly.
  • Peer-to-peer lending — Online peer-to-peer lending is a non-traditional way to borrow money directly from independent lenders or investors. Although lending sites set different rates and terms, some borrowers may qualify for competitive rates and low fees.
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