Just as with every Presidential transition, interest rate adjustments are up in the air. One thing is certain; they will change. When they do, those rate hikes will affect everything from home equity loans to automobile lending to credit cards. Fed Chair Janet Yellen recently announced that there will likely be three quarter point rate hikes for 2017. However, since most of President Donald Trump`s business tax cuts will be pushed into 2018, it is likely that only two rate hikes will happen. The economy might not be strong enough to support a third hike until the following year.
How the Rate Increases Will Affect You
So what does this mean for credit unions and lending? For one, higher interest rates are to be expected as rising energy prices begin to firm. Plus, the Republican-controlled congress and President Trump are expected to enact tax cuts that will boost the economy to support higher rates. Also, President Trump is expected to enact policies that will create government budget deficits. This will push higher yields within the Treasury. In addition, the labor market is expected to be tighter. This will drive rates to be higher, as one of the main reasons for not raising interest rates previously was a slack wage market. However, there could be a lag, as inflation and wage growth tend to follow each other about one year apart.
All of this together means we can expect home mortgage rates of about 4.6% toward the end of 2017 for a 30-year fixed mortgage, with 15-year mortgage rates coming in at 3.8%. Other types of consumer lending are expected to experience rate increases as well, such as automobile loans, credit cards, and home equity loans.
Are Your Forms Compliant?
With so many changes, it is important to make sure your forms are able to keep pace. One missed change and you could be out of compliance. Our Consumer lending forms package and our Home Equity lending packages are the perfect solution to this predicament. These packages can be customized to suit your needs, accommodate interest rate changes, and easily integrate with your data processor. The best part? They are always compliant. It’s something to think about as your credit union lends in 2017. Oak Tree forms keep you in compliance, so your credit union can carry on in 2017 with confidence.