No worries according to area financiers
The long-expected interest rate increase announced by the Federal Reserve Bank Thursday was treated as a nonevent by western Nevada County financial professionals.
Borrowers will have to pay a little bit more for mortgages and consumer loans, but the local real estate market is expected to remain strong. People invested in bonds and preferred stocks shouldn’t worry yet, financial planners said.
The Fed said it’s increasing the federal funds rate – what banks charge each other for overnight loans – one-quarter of a percentage point to 1.25 percent, the first rate increase in four years.
“I would tell my clients with (bonds and preferred stocks) that it is basically a nonevent as far as the market value of their securities today,” said Lawrence Goodfriend, president of Goodfriend Financial Management in Nevada City. “It’s not anything other than something to note.”
Goodfriend said inflation is the key to how fast the Fed will increase interest rates in the future.
“Right now, the inflation rate is calm. There are still a lot of weak spots in the economy,” he said.
Leading banks with operations in western Nevada County, including Wells Fargo, announced an increase in the prime interest rate to 4.25 percent, but didn’t announce a similar increase in rates paid to depositors.
A spokeswoman for Citizens Bank of Nevada County said current rates for deposits already have factored in the interest rate increase announced Wednesday.
Phil Ruble, owner of Olympic Mortgage and Investment Co. in Grass Valley, doesn’t expect the increase to cool off the hot local real estate market.
“Nevada County is unique,” he said. “We have a place people want to be.”
He said mortgage rates have been artificially low for the past two years because the Fed was trying to stimulate the economy, and the increase shouldn’t slow down the demand for mortgages or encourage more people to invest in them.
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