Why is my bank raising there loan rates and the Fed is dropping there’s?
Joseph F asked:
About 6 months ago I went to my loacl bank about building a home. It would be on a lot next to my business and its zoned commercial so they said it would have to be a commercial loan. The commercial rates are a bit higher and they said it would be around 7.25% for 15 years. After 4-5 months of planning and getting quotes from contractors I am now ready to build. Over the last 6 months the Fed has droped there rates several times so I was expecting a better rate also. I met with my loan oficer and much to my supprise the rate went up! They said it will now be 7.8% for a 15 year loan. I ran my credit score and its 740 so its not me. I even paid off my new truck since then. The loan officer said that the Feds rate has no affect on there commercial loan rates and rates went up because loans are more risky than they were 6 months ago. It sounds like they are charging me more because other people are defaulting?
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Tagged With Lot, Met, Supprise
Comments
3 Responses to “Why is my bank raising there loan rates and the Fed is dropping there’s?”
You pretty much answered your own question.
Now is not a good time for those who managed their money and credit well. The rates of return on many savings accounts are as low as they have been in a long time, and it’s harder to get a good loan rate.
Bank of America is jacking up a lot of their credit card rates, even for those with perfect payment records.
They need to raise money to cover for all the defaults.
mortgage and construction loans are based on the bond market and is not directly related to the fed rate. The rates dipped some in January but have since increased over the last several weeks. Also, loans are riskier now as you stated so lenders are more strict with granting them and especially commercial loans often have a higher rate now. Plus the rate you were given was a quote from several months ago I can give a quote today and have it different tomorrow or even later today, that’s how fast the market is changing.
Lenders are in fact raising most rates as they factor in more “risk.” Contrary to popular view, rates do not track the fed fund rates directly.