Credit rates – Slim De Walk http://slimdewalk.net/ Tue, 24 May 2022 12:04:11 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://slimdewalk.net/wp-content/uploads/2021/10/icon-8-120x120.png Credit rates – Slim De Walk http://slimdewalk.net/ 32 32 Why rising interest rates shouldn’t stop you from refinancing https://slimdewalk.net/why-rising-interest-rates-shouldnt-stop-you-from-refinancing/ Tue, 24 May 2022 12:04:11 +0000 https://slimdewalk.net/why-rising-interest-rates-shouldnt-stop-you-from-refinancing/ Homeowners struggling with higher mortgage payments are being told not to settle for rising interest rates, with tight competition between banks creating opportunities for those willing to negotiate. In a surprising move last week, three of Australia’s four big banks opted to cut interest rates for new customers, despite the Reserve Bank raising the official […]]]>

Homeowners struggling with higher mortgage payments are being told not to settle for rising interest rates, with tight competition between banks creating opportunities for those willing to negotiate.

In a surprising move last week, three of Australia’s four big banks opted to cut interest rates for new customers, despite the Reserve Bank raising the official exchange rate earlier this month.

Experts said the deals reflect fierce competition in the mortgage market and suggest those who want to refinance can still save thousands of dollars.

“There’s this assumption that because rates are going up, people are on the back foot when it comes to renegotiating their home loan,” said Sally Tindall, research director at RateCity.

“That’s not true – banks still need new customers.

“Understand your value as a borrower, because if you have equity up your sleeve, you’re in control.”

Surprise cuts

May’s RBA rate hike added more than $50 to the average monthly mortgage bill, and more pain is on the horizon with forecasts that the cash rate could hit around 2.5%.

But while the big banks largely pass on higher rates to existing customers, they actually make their introductory offers for new customers much more attractive.

ANZ, Australia’s fourth-largest lender, cut its lowest variable rate for new customers only from 2.44% to 2.29% on Tuesday.

This follows a similar move by Westpac last week, which saw the bank introduce a honeymoon rate of just 2.09% on its lowest variable home loan. A temporary discount of 0.4 percentage points to the standard floating rate expires after two years.

Commonwealth Bank, meanwhile, has just launched a new home lending vertical called Unloan, which has a variable starting rate of just 2.14%.

Ms Tindall said the moves are surprising on the face of it, but ultimately reflect increased competition for home loan customers, particularly with the rise of smaller independent lenders over the past decade.

These companies, including Athena and homeloans.com.au, pressure big banks into keeping rates low in a bid to entice “rusty” customers to switch lenders.

And because big banks have seen skyrocketing profits during the pandemic, they can afford to offer better rates to customers in an effort to maintain market share.

“Banks fight tooth and nail for new customers – they want to be on the beneficiary side of any refinanced loan, not the losing side,” Ms Tindall said.

“They are always ready to offer ultra-competitive rates to ideal customers.”

Homeowners who have maintained their mortgage payments during the pandemic and increased their equity are in the best position to renegotiate, Ms Tindall said.

Corey Beaver, mortgage broker and managing director of Experity Eight, agreed with Ms Tindall, saying more rate cuts are coming as competition in the market continues to heat up.

“You will see a constant readjustment of the products of the big banks to ensure that they remain competitive,” he said.

Beaver said many customers who pegged their home loans at ultra-low rates during COVID-19 are now on the verge of being pushed to higher variable rates, making renegotiation an important priority.

“If there’s no need to refinance or switch to another lender, you can just go back to your bank and ask for a rate review,” he said.

“Eight or nine times out of 10, we see banks come back with a cheaper rate.”

Quick approvals make refinancing easier

In another promising development for homeowners, banks didn’t just compete on rates.

There’s also been a big shift towards faster home loan approvals, with Commonwealth Bank’s new digital lending brand, Unloan, promising to approve customers in 10 minutes.

Ms Tindall said this means refinancing is not as difficult as it was a few years ago.

“It’s come in leaps and bounds…banks are making loans very quickly, having streamlined the application process,” she said.

“People often put refinancing in the ‘too difficult basket’, but it’s not as big of a chore as it used to be.”

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Best 4-Year CD Prices for May 2022 https://slimdewalk.net/best-4-year-cd-prices-for-may-2022/ Sun, 22 May 2022 19:11:01 +0000 https://slimdewalk.net/best-4-year-cd-prices-for-may-2022/ We recommend the best products through an independent review process, and advertisers don’t influence our choices. We may receive compensation if you visit partners we recommend. Read our statement to advertisers for more information. If you have cash savings that you want to keep for several years without risk or market volatility, you can turn […]]]>

We recommend the best products through an independent review process, and advertisers don’t influence our choices. We may receive compensation if you visit partners we recommend. Read our statement to advertisers for more information.

If you have cash savings that you want to keep for several years without risk or market volatility, you can turn to certificates of deposit or CDs. This is because pledging your funds to a CD can earn you a higher interest rate than a standard savings account, while eliminating the risks that investing in the market would entail.

Although not as common as their 3- and 5-year siblings, 4-year CDs are offered by banks and credit unions across the country. Not only can a 4-year certificate provide the ideal time horizon for your financial plans, but it’s also important for anyone building a CD ladder.

Different institutions pay widely varying rates on CDs, so it’s crucial that you do your homework. For your convenience, we continuously rank the best 4-year CD rates, based on our daily rate tracking of approximately 200 banks and credit unions that offer CDs nationwide. To qualify for our ranking, the certificate must have a minimum deposit requirement of $25,000 or less and be offered by a federally insured institution (FDIC for banks, NCUA for credit unions).

When we find that multiple institutions are paying the same rate, we prioritize our ranking by the shortest term, then the smallest minimum deposit, and if there is still a tie, whereby CD has a lighter early withdrawal penalty.

Best CD prices over 4 years:

  • Connexus Credit Union3.11% APY
  • KS State Bank – 2.80% APY
  • Department of Commerce Federal Credit Union – 2.77% ABS
  • Merrick Bank – 2.56% ABS
  • First National Bank of America2.55% APY
  • First Internet Bank – 2.53% ABS
  • Crescent Bank – 2.50% APY
  • Living Oak Bank – 2.50% APY
  • Popular direct – 2.45% APY
  • Bank of Seattle – 2.43% ABS
  • Alliant Credit Union – 2.40% APY
  • ConnectOne Bank – 2.35% APY
  • PenFed Credit Union – 2.35% APY
  • Savings on bread – 2.35% APY
  • NASA Federal Credit Union – 2.35% APY

Below are the best CD rates available from our partners, followed by a ranking of some of the best CD rates nationwide.


Detailed information on the highest paying 4-year CDs available nationwide is provided below, including details on minimum deposits and early withdrawal penalties. For credit union CDs, information is also provided on how anyone can become a member.

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Savings account interest rates remain low despite Fed hikes https://slimdewalk.net/savings-account-interest-rates-remain-low-despite-fed-hikes/ Fri, 20 May 2022 22:50:38 +0000 https://slimdewalk.net/savings-account-interest-rates-remain-low-despite-fed-hikes/ This is just one of the stories in our “I’ve Always Wondered” series, where we tackle all your business questions, big or small. Have you ever wondered if recycling is it’s worth it? Or how store brands pile up against brand names? Discover more of the series here. Auditor Dean LeBlanc asks: Since interest rates […]]]>

This is just one of the stories in our “I’ve Always Wondered” series, where we tackle all your business questions, big or small. Have you ever wondered if recycling is it’s worth it? Or how store brands pile up against brand names? Discover more of the series here.


Auditor Dean LeBlanc asks:

Since interest rates are rising and banks are charging more interest on loans, why is the interest rate on my savings account still around [a fraction] of what it was 30 years ago? What would encourage banks to charge higher rates on savings accounts?

When the Federal Reserve raises interest rates, the rates on your savings accounts usually increase accordingly. But while the Fed has raised rates a total of 75 basis points since the start of the year, savings rates have barely followed suit.

Since April 2021, the national average interest rate on savings accounts has largely was 0.06%, barely rebounded to 0.07% last month.

This is because the banks have too many deposits for now, say financial experts. Last month, commercial banks held more than $18 trillion.

“You could say they’re full of cash, so they don’t have any incentive right now to offer more attractive rates,” said Angelo Kourkafas, investment strategist at Edward Jones.

Typically, banks make money on the difference between what they charge for loans and what they pay for deposits, Kourkafas said. And in recent years, the difference between these two has narrowed.

In 2020, at the start of the pandemic, households were saving more and borrowing less because they were unable to spend money due to the lockdown, Kourkafas said. Congress also approved stimulus packages that amounted to $803 billion in payments.

On top of that, consumers were risk averse and wanted their money in cash, said Ken Tumin, senior industry analyst at LendingTree and founder of DepositAccounts.com, a bank account comparison site. Deposits increased sharply from $13.4 trillion to $15.3 trillion between February and May 2020.

In 2020 and 2021, personal loans and credit card balances decreases.

“So banks actually saw less growth on their loans, while they had strong growth on deposits,” Tumin said. “The purpose of deposits is to fund loans, so they didn’t need to attract deposits to fund those loans.”

But while savings rates are low on average for traditional banks, Tumin said online savings accounts earn a higher return. Some banks are offer prices up to 1.25%.

He said online banks are quicker to respond and have increased savings rates around 8 basis points this year (compared to a meager 1 basis point increase in the national average).

Tumin said online banks offer higher rates because they don’t have to maintain an expensive branch network and there is greater competition because consumers can quickly move their money from bank to bank. ‘other. People using traditional banking services, on the other hand, tend to leave their savings in place because they are not particularly “rate sensitive”.

Online savings rates could eventually push more traditional brick-and-mortar banks to raise rates so they can compete, he added.

And Kourkafas said he believes as the Federal Reserve continues to raise rates, your savings account returns may slowly increase in the coming months.

Consumer savings could decline, in part due to rising inflation, he said. So banks might eventually want to attract more deposits.

The Fed is expected to raise rates five more times this year and plans to raise rates by 50 basis points at its next two meetings. Fed Chairman Jerome Powell also told “Marketplace” host Kai Ryssdal in an interview that the Fed is “ready to do more” and that a 75 basis point hike is not not out of place.

A big question going forward, Kourkafas and Tumin said, is: will there be a recession? Some big banks say yes, although some economists think it can be avoided.

If a recession hits, it will lead to lower consumer spending, which usually means fewer people taking out loans, Tumin explained. And if demand for loans declines, banks won’t need deposits, which will keep deposit interest rates low — even if the Fed raises rates.

Despite the low returns on savings, Tumin said the bank is an “appropriate place” to keep your money if it’s part of an emergency fund or your short-term goals and expenses. But for long-term goals, you should think about investing in options like mutual funds and exchange-traded funds.

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Inflation and interest rates appear to be driving the housing market in southern Maryland https://slimdewalk.net/inflation-and-interest-rates-appear-to-be-driving-the-housing-market-in-southern-maryland/ Thu, 19 May 2022 13:00:00 +0000 https://slimdewalk.net/inflation-and-interest-rates-appear-to-be-driving-the-housing-market-in-southern-maryland/ HUGHESVILLE, Md. – May 11, 2022 – As inflation soars and interest rates continue to rise from historic lows, the spring housing market in southern Maryland is beginning to show some anticipated trends. Although an overwhelming majority of homes sold in the past month did so in less than 10 days, there is more active […]]]>

HUGHESVILLE, Md. – May 11, 2022 As inflation soars and interest rates continue to rise from historic lows, the spring housing market in southern Maryland is beginning to show some anticipated trends.

Although an overwhelming majority of homes sold in the past month did so in less than 10 days, there is more active inventory than this time last year. Although most homes sold quickly, the average days on market in southern Maryland increased slightly by two days from 2021.

This is a slight positive as the region saw its inventory months drop to 0.71 months in April and hopefully on its way back to healthy market levels, which have not been seen since 2019.

With interest rate hikes now over 5%, home sales and home price appreciation are expected to slow. Due to the time of year and current economic volatility, it will be increasingly difficult to determine the effectiveness of these rate changes for several months.

“It’s always a good time to buy real estate, despite recent mortgage rate hikes and low inventory,” said 2021-22 Southern Maryland Association of Realtors® President Gregg Kantak. “Nevertheless, understanding how housing affects inflation means understanding what US inflation data is trying to measure. The consumer price index (CPI) is a “cost of living index”: it aims to measure the price of the various goods and services consumed by households. It is not intended to measure the value of families’ investment assets, such as stocks. However, this objective creates a unique challenge with owner-occupied housing: the price of a home reflects both its value as an investment asset, which CPI in principle wants to ignore, and as a property that provides a “service” (i.e. housing) to the families living there, the cost of which CPI wants to incorporate.

Prices continue to rise, with the region seeing the median sale price rise 8.11% from a year ago to $400,000.

Market volatility and uncertainty are seen as major contributors to fewer people wanting to sell their homes, leading to a 7.09% drop in new listings in April last year. The total number of new registrations is not far from the five-year average.

Another sign of the market returning to more normal levels is a slight drop in the average sale price from the original list price.

This time last year, homes were selling for an average of 101.8% of what they were originally listed for, but that figure has now dropped to 101.3%. Although this is a small decrease, it shows a significant change in the local market.

“Rising house prices directly affect household wealth and neighborhood affordability,” Kantak explained. “They also play an important role in headline inflation. Even small increases in rent and house prices can, in principle, have significant effects on headline inflation.

Housing market statistics for each county in the Southern Maryland region are available below:

Calvert County

  • Units sold: 136 (-26.09%)
  • Total sales volume: $65,823,743 (-12.67%)
  • Average days on market: 14 (-3 days from April 2021)
  • Median Selling Price: $442,450 (+17.99%)

Charles County

  • Units sold: 261 (+1.56%)
  • Total sales volume: $113,706,555 (+11.57%)
  • Average days on market: 15 (+3 days from April 2021)
  • Median Selling Price: $420,000 (+11.41%)

St. Mary’s County

  • Units sold: 164 (+2.50%)
  • Total sales volume: $66,109,657 (+16.73%)
  • Average days on market: 23 (+5 days from April 2021)
  • Median Selling Price: $379,545 (+8.47%)

The statistics in this article were compiled with the cooperation of Bright MLS, a leading housing market data source and real estate listing service for Realtors® throughout the region.


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US corporate bond trades set to ebb this year amid rising rates and volatility – BofA https://slimdewalk.net/us-corporate-bond-trades-set-to-ebb-this-year-amid-rising-rates-and-volatility-bofa/ Tue, 17 May 2022 17:43:00 +0000 https://slimdewalk.net/us-corporate-bond-trades-set-to-ebb-this-year-amid-rising-rates-and-volatility-bofa/ U.S. dollar banknotes are displayed in this illustration taken February 14, 2022. REUTERS/Dado Ruvic Join now for FREE unlimited access to Reuters.com Register NEW YORK, May 17 (Reuters) – Sales of U.S. bonds by blue chip issuers are expected to fall around 10% this year as borrowers face higher rates and market volatility, it said […]]]>

U.S. dollar banknotes are displayed in this illustration taken February 14, 2022. REUTERS/Dado Ruvic

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NEW YORK, May 17 (Reuters) – Sales of U.S. bonds by blue chip issuers are expected to fall around 10% this year as borrowers face higher rates and market volatility, it said on Tuesday. a BofA official (BAC.N).

Corporate bonds had a difficult start to the year due to investor concerns about the impact of tighter monetary policies on corporate earnings and borrowing costs, as well as the possibility of a sharp economic slowdown as the Federal Reserve attempts to curb relentless inflation.

Credit spreads – the interest rate premium demanded by investors to hold corporate debt over safer US Treasuries – have widened, but not dramatically.

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The ICE BofA U.S. Corporate Index (.MERC0A0), which tracks investment-grade corporate debt in dollars, stood at 149 basis points on Monday, about 50 points higher since the start of the year and three basis points lower than the nearly two-year high. touched in March.

In the first few months of this year, issuance of investment-grade U.S. corporate bonds totaled around $470 billion, matching levels seen in the same period a year earlier, as borrowers concerned about the rate hikes sought to secure still favorable funding conditions, said Dan Mead, head of investment grade syndicate at BofA.

But that pace has slowed recently as markets have become increasingly volatile on concerns about monetary policy and economic growth.

“We remain consistent with our expectation of overall supply down around 10% to 12% this year compared to last year, as we expect the second half of this year to be calmer, certainly calmer than the second half of the year that we’ve seen in 2020 and 2021,” Mead said.

Last year, US investment grade bond issuance was around $1.5 trillion, according to Refinitiv data.

As global central banks rapidly withdraw stimulus, liquidity in financial markets has deteriorated this year as traders face wild intraday swings and shrinking trade sizes. Read more

“The big theme in our market, like other asset classes, has been volatility, both in the rates market and volatility in the credit spread market,” Mead said, adding that this has contributed to greater caution on the part of investors.

“They are still very committed to participation, but perhaps on a smaller scale in terms of deal size, and certainly have more price discipline, needing to see larger concessions to participate in new shows,” he added.

US credit markets rallied after the Federal Reserve began raising rates in March, but that was short-lived and lower-rated corporate bonds have since hit new lows. Read more

The Fed is expected to raise interest rates by 50 basis points in June and July and expects to start shrinking its balance sheet in June at a faster pace than in its previous exercise of “quantitative tightening”.

“These factors – rate hikes, QT – will start to affect the real economy,” said Mark Howard, managing director of BNP Paribas in New York.

“What’s remarkable about what we’ve seen in the markets over the past week is a shift from fear of higher rates to greater fear of slower growth,” he said. he said, “and that’s contributing to some of the anxiety in the credit short-term. … Growth concerns are weighing on spreads now.”

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Reporting by Davide Barbuscia; Editing by Leslie Adler

Our standards: The Thomson Reuters Trust Principles.

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Prepare for higher interest rates https://slimdewalk.net/prepare-for-higher-interest-rates/ Sun, 15 May 2022 23:09:09 +0000 https://slimdewalk.net/prepare-for-higher-interest-rates/ Data released by the Office for National Statistics showed retail inflation hit an eight-year high of 7.79% in April, due to rising food and fuel prices. The former rose to 8.38%, driven by double-digit inflation for edible oils and vegetables, while grain inflation jumped in April on higher wheat prices. Inflation has now remained above […]]]>

Data released by the Office for National Statistics showed retail inflation hit an eight-year high of 7.79% in April, due to rising food and fuel prices. The former rose to 8.38%, driven by double-digit inflation for edible oils and vegetables, while grain inflation jumped in April on higher wheat prices. Inflation has now remained above the RBI’s upper tolerance limit of 6% for four consecutive months.

The secondary impact of rising fuel prices is also visible, with transport and communications inflation jumping to nearly 11% from 8% the previous month. April data again showed that rural inflation has outpaced urban inflation as the rural consumption basket gives more weight to food. This is not good news for rural demand, which has yet to show a sustained recovery.

The latest data also indicates that inflation is becoming more widespread. With Covid restrictions lifted and demand picking up, service sector inflation captured by the “miscellaneous” category jumped to 8.03%. And with demand rebounding, the pass-through from rising input costs is also growing. As demand for goods recovered faster than services, producers of goods passed on input costs to consumers. But as services recover, the price pass-through to consumers will be greater in the months ahead. Concerns about rising services inflation were also reflected in the April survey of the S&P Global Purchasing Managers’ Index for India’s services sector. Service providers surveyed pointed to a sharp increase in their operating expenses from March to April, prompting them to pass on the impact of rising input costs to consumers.

Although there may be a slight moderation, inflation is expected to remain above the RBI’s 6% threshold in the coming months. While global food prices as measured by the FAO Food Price Index fell slightly in April, they are still 30% higher than in April 2021. The conflict in Ukraine continues to have an impact on food grain and vegetable oil markets. Rising fertilizer prices are likely to drive up production costs for farmers, leading to high food prices. Although the government has extended price support through higher subsidies, it remains to be seen whether this will be enough to cool prices.

With sticky crude oil prices and continued supply-side disruptions amplified by Covid-induced lockdowns in China, the RBI has rightly refocused its attention on inflation targeting. This is needed as central banks around the world pursue tight monetary policies to fight inflation. The US Fed followed its 25 basis point hike with another 50 basis point hike in May. These will be followed by increases of a similar magnitude in the coming months. The Bank of England raised its key rate by 25 basis points, its highest level in 13 years, to fight inflation. Central banks in other countries are also considering rate hikes.

In its April policy, the RBI announced the withdrawal of excess liquidity but did not raise the policy rate. The expectation of a sharp rise in inflation led it to announce an off-cycle 40 basis point hike in the key repo rate. The RBI is now likely to respond with aggressive rate hikes to prevent the price spiral from taking hold. By committing to reduce inflation by raising rates, it can anchor inflationary expectations. Unanchored expectations will further fuel inflationary pressures. The continued strength of the dollar index and the sharp depreciation of the rupee over the past few days could put further pressure on prices through higher imported inflation. This reinforces the need for interest rate hikes.

In addition to calibrated rate hikes, the RBI must accelerate the withdrawal of ultra-accommodative liquidity support provided during the pandemic. He must present a revised inflation projection for the current year and his views on the possible path of interest rates. Rising inflation will reduce discretionary spending and negatively impact consumption which had just started to pick up. There are worries of a recession in advanced economies, as rising prices have begun to manifest themselves in lower purchasing power and lower consumer confidence. Destruction of demand could trigger price moderation. Base metal prices have declined from the peak seen in recent months.

Monetary policy support must be accompanied by fiscal support measures. The policy response will need to be adapted to changing geopolitical conditions and commodity and food price trajectories while balancing fiscal consolidation imperatives.

This column first appeared in the print edition of May 16, 2022, under the title “The party is over”. The author is a Principal Investigator, NIPFP. Views are personal

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Mortgage rates rise slightly, but experts say recession unlikely https://slimdewalk.net/mortgage-rates-rise-slightly-but-experts-say-recession-unlikely/ Fri, 13 May 2022 21:02:37 +0000 https://slimdewalk.net/mortgage-rates-rise-slightly-but-experts-say-recession-unlikely/ (NewsNation) – Average long-term U.S. mortgage rates rose again this week, with interest at their highest level since 2009. The 30-year rate climbed to 5.3% from 5.27% last week. last week, when at this time last year it was almost 3%. No one wants to see this end in a recession like 2008, but there […]]]>

(NewsNation) – Average long-term U.S. mortgage rates rose again this week, with interest at their highest level since 2009. The 30-year rate climbed to 5.3% from 5.27% last week. last week, when at this time last year it was almost 3%.

No one wants to see this end in a recession like 2008, but there are two main reasons why a similar crash is unlikely, even if housing costs continue to rise.

Jamie Matzdorff, a realtor with Keller-Williams Realty in Boise, Idaho, predicts home prices will stabilize over the next few years.

While no price drop in the near future is bad news for buyers, those who already own property are reaping the benefits. The typical American homeowner earned a record net worth of $50,200 last year.

Some places are more expensive to live than others. Boise tops the list of cities overvalued by more than 50%, according to Moody’s Analytics, followed by Sherman-Denison, Texas, and Muskegon, Michigan.

Many of these overpriced places offer breathtaking scenery. Matzdorff, of Boise, said having four full seasons helps sell Idaho’s Treasure Valley region. Changing lifestyles and attitudes stemming from the pandemic sealed the deal.

“COVID has increased the rapid rate of being able to work from home and live where you want to live while you work from home,” Matzdorff said.

But average homebuyers must compete with big corporations and rental agencies to secure property in these sought-after locations.

Interest rates are also going up, which can be a hurdle for many buyers – although Matzdorff insists they still get a deal, saying: “6% is still a phenomenal rate. It’s just not 3%.

That 3% rate had been “luck of the draw,” Matzdorff said.

“(It was) like winning the lottery for three years,” she said. “The economy can’t support that.”

For those with an eye for trends, this is all too reminiscent of what the markets looked like in 2007, just before a massive real estate crash and recession. Is this bubble also about to burst?

Matzdorff and others predict that will not be the case now, for two main reasons. The new federal rules have changed home loans in a positive way, so more people are likely to repay their loans rather than default. And the United States is in the midst of a massive housing shortage.

Mortgage giant Freddie Mac estimates that the country is short of about 4 million homes.

Given that the pace of housing construction was slowed by the bursting of the last housing bubble – and further constrained by the pandemic – it will take time for supply to catch up with demand. In the meantime, for those looking to move to a place like Boise, Matzdorff has some good news.

“I predict, and what we see is that things will continue to plateau, at least in this market, because we’re still an extremely desirable place to be,” she said.

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TD Bank stocks: Higher interest rates could become problematic (NYSE: TD) https://slimdewalk.net/td-bank-stocks-higher-interest-rates-could-become-problematic-nyse-td/ Thu, 12 May 2022 16:40:00 +0000 https://slimdewalk.net/td-bank-stocks-higher-interest-rates-could-become-problematic-nyse-td/ JHVEditorial photo/iStock via Getty Images Investment thesis TD Bank (NYSE: TD) is a staple for many Canadian and American income-seeking investors. In 2020 and 2021, after rates edged closer to zero and after much fiscal stimulus, Canadian bank stocks not only saw a rebound but a solid rally. In 2021, TD shares provided a 36% […]]]>

JHVEditorial photo/iStock via Getty Images

Investment thesis

TD Bank (NYSE: TD) is a staple for many Canadian and American income-seeking investors. In 2020 and 2021, after rates edged closer to zero and after much fiscal stimulus, Canadian bank stocks not only saw a rebound but a solid rally. In 2021, TD shares provided a 36% annual return for its investors. That being said, the party appears to be ending as Canadian interest rates rise, which I suspect will slow earnings growth as HELOCs, mortgages and various other retail bank lending decline. Finally, while I think the next 6-18 months for TD will be problematic, I would look to add or take a position should a significant enough downside occur.

Chart
Data by Y-Charts

TD: excellent retail banking segment, but poor economic conditions

There is no doubt that TD Bank has an incredibly robust retail banking segment, the business has almost 27 million customers around the world and approximately one-third of Canadians do business with TD Canada Trust. Moreover, the company has developed an adequate positioning in the American market, becoming one of the 10 largest American banks. However, with 2022 Canadian mortgage rates surging to 4.5% and the Bank of Canada raising rates by 50 basis points, it looks like the cheap money provided by the Bank of Canada is starting to dry up. . The outcome of the credit crunch is expected to hamper financial services growth, but is expected to have the biggest impact on retail banking earnings. This is problematic for all Canadian Tier 1 banks, but TD appears to be less well positioned than its peers. For starters, when you compare TD to its biggest competitor, Royal Bank of Canada (RY), you’ll notice that retail banking represents a minority of RBC’s revenue at just 40%, while TD represents 58% of the bank’s income. Additionally, in terms of non-interest revenue growth, TD is in the middle of the Tier 1 bank pack.

Growth in BMO's non-interest revenue versus its peers

Excel

The reason TD lags behind Bank of Montreal (BMO) and RBC is that TD’s revenue is more dependent on HELOC financing, mortgages and various other personal loans. While BMO and RBC both have strong capital market and commercial banking segments. Finally, when you look at TD’s quarterly earnings per share since 2020, you can see a fair correlation between EPS growth and cheap money and economic recovery.

Data

Excel, author’s calculation

Notice how in quarters 3 and 4 of 2020 we saw impeccable EPS growth, primarily due to the economic recovery after reopening, fiscal stimulus and low interest rates. This led TD to grow EPS by 51% and 131% in those two quarters respectively, but EPS growth has since stalled. With recent stagnant EPS growth, combined with the end of the Bank of Canada’s quantitative easing program in the fourth quarter of 2021 and a 50 basis point rate hike in the first half of 2022, the retail segment is thriving of TD, as well as the future performance of the rest of its operations, concerns me. in trimesters 2 to 4.

Inflation, mortgage stress test and consumer credit all point to lower lending

Along with interest rate hikes, inflation, stress tests and consumer credit data all point to lower lending. First, although mortgage rates rose before that, Office of the Superintendent of Financial Institutions (OSFI) increased credit stress testing services that banks use to determine a customer’s mortgage eligibility to 5.25%. This may not be the rate the customer will pay on their mortgage, but it is needed to qualify for a mortgage with a Tier 1 Canadian bank. Now that interest rates are rising, it will become increasingly difficult for Canadians to get approved for a mortgage, which could hurt TD’s Canadian customer base. Second, inflation and economic stagnation appear to be reducing consumer confidence with declining consumer credit data for Canadians.

Data

tradeeconomy

It almost seems that inflation and stagnation have become a precursor to declining consumer credit and that a decline in consumer credit could lead to lower lending at the end of 2022. This is problematic for the segment of TD’s retail business, of which the Canadian retail banking segment constituted 60% net income for the last quarter.

Evaluation

TD Bank is overvalued when considering the company’s price-to-book ratio relative to other Tier 1 banks.

Chart
Data by Y-Charts

TD’s P/E ratio is pretty high and the company doesn’t even have superior operating performance. When we look at the return on equity comparison of the major banks from the previous year, we see that TD’s above-average price-to-book ratio is not justifiable.

Chart
Data by Y-Charts

Due to a higher P/E ratio than its peers and a lower ROE, my consensus is that TD’s stock is currently slightly above the price.

Conclusion: expect a potential downside and an average drop

Due to rising interest rates, inflation, falling consumer credit and mortgage stress tests, I suggest investors considering TD wait until late 2022 or early 2023 before taking or adding to their position. The company enjoys impeccable brand recognition, a robust retail banking segment and operates in an extremely narrow-moat sector. That said, the economy looks problematic for the cyclical retail banking sector. Shareholders need to hang in there, 2022 looks like a bumpy ride.

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Rising Rates Mean Debt Cannot Be Ignored – English Cenbanker | Investment News https://slimdewalk.net/rising-rates-mean-debt-cannot-be-ignored-english-cenbanker-investment-news/ Tue, 10 May 2022 16:14:00 +0000 https://slimdewalk.net/rising-rates-mean-debt-cannot-be-ignored-english-cenbanker-investment-news/ PARIS (Reuters) – Rising interest rates make it all the more important that post-pandemic public debt levels be brought down to more sustainable levels, the head of France’s central bank said on Tuesday. France borrowed heavily during the pandemic to stabilize its economy, pushing public debt from just under 100% of gross domestic product in […]]]>

PARIS (Reuters) – Rising interest rates make it all the more important that post-pandemic public debt levels be brought down to more sustainable levels, the head of France’s central bank said on Tuesday.

France borrowed heavily during the pandemic to stabilize its economy, pushing public debt from just under 100% of gross domestic product in 2019 to nearly 113% last year.

Nonetheless, the country’s debt burden figured little in the political debates ahead of last month’s presidential election, in which Emmanuel Macron comfortably won another five-year term.

As parties prepare for the June legislative elections, many candidates have focused more on policies that would increase debt. The far-left leader of a new left-wing coalition which hopes to secure a majority notably wants to lower the retirement age to 60 from 62.

At a conference organized by France’s independent fiscal watchdog, Villeroy said too many people saw debt as “limitless and costless” after the exceptional borrowing during the pandemic and in light of the plans of the European Central Bank to raise interest rates in the face of record inflation.

“Our board of governors will do whatever is necessary to fulfill our primary mandate of price stability, have no doubt about that,” said Villeroy, who also sits on the board of governors of the European Central Bank.

“It is therefore all the more important for fiscal authorities to ensure debt sustainability as interest rates rise,” he added.

The central bank estimates that every 1 percentage point increase in interest rates over time raises France’s annual debt-servicing costs by 40 billion euros ($42 billion), almost as much as the defense budget.

France could reduce debt to less than 100% in a decade by capping spending growth at 0.5% per year, half the more than 1% seen on average in the previous decade.

(Reporting by Leigh Thomas; Editing by Alexandra Hudson)

Copyright 2022 Thomson Reuters.

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How high are the interest rates? https://slimdewalk.net/how-high-are-the-interest-rates/ Sun, 08 May 2022 23:48:03 +0000 https://slimdewalk.net/how-high-are-the-interest-rates/ Last week’s comment asked how high the dollar can climb before it snuffs out inflation and the escalating hysteria that has accompanied it. Inflation is supposed to depreciate the dollar, but that’s not what happened. Instead, it rose sharply against all other currencies. Experts were unable to explain this, or why the rally started long […]]]>

Last week’s comment asked how high the dollar can climb before it snuffs out inflation and the escalating hysteria that has accompanied it. Inflation is supposed to depreciate the dollar, but that’s not what happened. Instead, it rose sharply against all other currencies. Experts were unable to explain this, or why the rally started long before the Fed even thought of tightening. It’s simple, however, if you understand deflation and its main symptom, an increase in the real debt burden. The dollar has gone up because it “knows” there is more debt than it can ever pay off. This can only lead to massive waves of bankruptcies that will make us nostalgic for the consumer inflation that is in the headlines today.

Of course, the Fed could print enough money to pay off everyone’s debts, including its own: student loans, our collective liabilities for Social Security, Medicare and private pensions, and so on. – but also car loans, mortgages and credit card balances that have exploded. The resulting hyperinflation would solve nothing, however, even if it destroyed lenders as a class and all institutional conduits for borrowing. The megabanks would be ruined, leaving no one to lend to you, me or anyone else. It could take a generation or more for credit to take root again. Do we really want to go down this path?

No more unnecessary tightening

This week’s question ties into the question about the dollar: how high can interest rates rise before snuffing out inflation and the increasingly acute hysteria that accompanies it? Economists and pundits seem to think the Fed has only begun to tighten. It is more likely that interest rates are already high enough to have pushed the US and global economies into a deep recession. It was going to happen anyway because of all that unpaid debt, but the brutality of the Fed has unleashed market forces that have already spoken of the need for further tightening.

My long-term forecast calls for a high of 3.24% for the US 10-year note. On Friday, the rate hit 3.13%, just an inch from the target. The rally was so fierce that I double-checked my calculations to determine if an overshoot could occur. I’ll stick to the target for now, but even if it’s exceeded, rates for homebuyers in particular have reached levels that froze the economy and crushed real estate in 2007. If you’ve been a large-scale buyer of long-term Treasuries in In order to implement the Gold-versus-T-Bonds “barbell” hedging strategy that I’ve been advising for the past couple of years, it’s time move more aggressively to the bond side of the hedge.

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