What Falling Interest Rates Mean for Business Owners

According to Freddie Mac, 30-year mortgages have dropped to a record low for the 12th time just this year. For the first time in almost half a century 30-year fixed rate mortgages have fallen to just 2.78%. A year ago, 30-year Mortgage rates were 3.62%. These record low rates are similar for 15-year mortgages, which have fallen from 3.13% a year ago to 2.32% today.  

These record low mortgage rates have led to an influx of applications in which many banks simply cannot fulfill. This has resulted in banks limiting lending to just those with top tier credit scores and the ability to put down a greater down payment. 

“With rates at historic lows, mortgage lenders are raising rates and margins in order to slow down application volumes because they simply cannot fulfill the loans with the staffing and infrastructure they currently have in place. This supply-demand dynamic currently has a large impact on rates offered to consumers,"

-Jim Cameron, senior partner with the Stratmor Group

What is causing these low mortgage rates? Mainly the Federal Reserve which is trying to strengthen the housing market through purchasing mortgage-backed securities. This is not just for the remainder of 2020, according to the Washington Post, this should be a policy that lasts through 2023. This means mortgage rates should remain low for a while.

With the pandemic driving interest rates down below 3%; borrowing money has never made more sense. The issue that has arisen is that lenders have begun tightening up who they will lend to, which has caused some hardship for people with lower credit scores and less cash on hand.  

“Despite the ongoing pandemic and economic uncertainty, purchase applications have now increased on an annual basis for six consecutive months,”

-Bob Broeksmit, President and CEO of the Mortgage Bankers Association

Current Implications:

• According to the New York Times, banks like Wells Fargo and Chase have temporarily stopped HELOC and cash- out refinancing for the first time.

•  Credit card companies are lowering lines of credit by thousands of dollars.

•  Banks, like Wells Fargo, have longer approval processes and higher required down payments.

•  According to Jonathan Smoke, chief economist at Cox Automotive, subprime borrowers (credit scores below 620) do not have access to getting loans like they did pre-pandemic.

Fortunately, US Capital Solutions offers a quick and easy way to obtain financing for your business, with over 99.5% approval. With over 25 years in the industry, USCS has been able to qualify individuals with A-D credit ratings for low rate financing. Our services allow our clients to get financing within weeks, offering a “one stop shop” to help grow your business.