A report says that banks are already taking defensive measures in readiness
There could be some good news on the way for homeowners and buyers with a growing likelihood of the Fed cutting interest rates next month.
According to financial behavior experts Analyticom LLC, the Fed’s decision may be informed by the impact of the coronavirus, which is continuing to spread.
The World Health Organization declared the situation a global health emergency and although cases outside China remain relatively low, the biggest threat to the US economy from a prolonged outbreak is weakened consumer confidence.
Analyticom says that banks and credit unions are taking defensive action to mitigate lower interest rates by cutting their deposit rates for savers by an average of 1 basis point.
"Now is the time to reduce exposure to interest-rate risk and to prepare for such a possibility" says Dr. Dan Geller founder of Analyticom. "Interest-rate risk is now very high, and banks and credit unions should use scientific models to establish the optimal pricing position of their deposit rates based on the economic environment.”
The financial markets have been anticipating that the Fed could make several rate cuts if the US economy requires stimulus. The coronavirus exposure could tip the balance.
While this would not automatically mean a cut in mortgage rates, lenders may well choose to make a cut shortly after the Fed decision on March 18.
