Tuesday Topic: 2018 Interest Rates

As a community bank, I see two methods for setting interest rates on loans.  1) succumb to peers, or 2) price based upon risk.  Of course life is never that simple, so we do both - sort of.

We sell service not rate.  Most of what we do is commercial real estate, so it is generally 5 year fixed.  We generally add a spread to the 5-year CMT for the initial price and a little bit higher spread to the reset.  We are always higher than our competition.  I saw a rate of 3.7% for five-years fixed last week from a competitor (mid-tier).  With prime at 4.25%, that makes absolutely no sense, unless your cost of funds is inordinately low with no concern for rising. In spite of our higher rates, we are growing about 30% this year.


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Jeff W. Dick
MainStreet Bank
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Original Message:
Sent: 12-12-2017 09:34
From: Barb Rehm
Subject: Tuesday Topic: 2018 Interest Rates

Interest rates are likely to rise by at least 1% in 2018, the largest annual increase in a dozen years, according to a Bloomberg story from December 10. The Fed is expected to tack another quarter of a percentage point to its benchmark rate on Wednesday.

How are you preparing?

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Barb Rehm
Promontory Interfinancial Network
Arlington VA
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