Federal Reserve leadership will meet this week to decide what to do about interest rates. Nobody expects the central bank to do anything — experts think the Fed will wait until mid-September to lower rates.
And while the cost of borrowing in this economy will probably start to come down (at some point, anyway) the interest rates consumers and businesses have to pay are probably going to stay elevated in the near future.
Brad Bolton, the CEO of Community Spirit Bank in Red Bay, Alabama, said he’s been getting a lot of questions about interest rates over the last few months: “‘Hey, have the rates fallen yet? Is it time for me to refinance?’ And you say, ‘No, no, rates have not fallen yet.’”
Some of Bolton’s customers have been waiting for rates to come down before borrowing. But overall, his loan volumes are up about 6% since December. He said that’s because many clients are deciding to go ahead and borrow anyway.
“I may not have this opportunity to purchase this piece of property, or this bulldozer, or this piece of heavy equipment. I’m willing to go ahead and fund this purchase right now at this higher rate,” Bolton said.
Many businesses can’t afford to wait around for interest rates to drop, said Chris Duncan, chief lending officer at La Salle State Bank in Illinois.
“It’s not good business practice, to have to wait around too long, to do the things they know that eventually they’re going to have to do,” he said.
That said, Duncan said his bank has its guard up right now, because of how uncertain the economy is.
“There’s enough disagreement among our advisory staff, and among our board members, in what we feel we’re reading in the news on where we’re headed, and how quickly we’re going to get there,” he said.
As a result, La Salle State Bank is doing more check-ins with its borrowers.
“(We are) requesting updated financial information from our customers more frequently, asking how things are going, and what they’re seeing in the market, and how they feel about the future,” Duncan said.
Many borrowers have their guard up, too.
Alice Frazier, CEO of Bank of Charles Town in West Virginia, said staff noticed new loan demand has slowed over the past 30 days.
Frazier said some of her smaller business borrowers are feeling stressed by the uncertain economy and years of high interest rates.
“So taking on additional debt requires them to think through what the future might hold,” she said.
And whether they’ll be pulling in enough revenue to pay back that debt.