This year, banks are tasked with reviewing student loan forgiveness with their customers to help people manage their mortgages amid a rollercoaster of interest rates and high inflation.
Laurie Stewart, president and CEO of Seattle’s Sound Community Bank and director of the Seattle branch of the Federal Reserve Bank of San Francisco, joins Kai Risdal of “Marketplace” on how higher interest rates are affecting banks and their customers. We talked about making an impact. An edited transcript of their conversation is below.
Kai Risdal: See, how’s the vibe at the Bank in the Neck of the Woods these days?
Laurie Stewart: Sure, the atmosphere is about higher interest rates, right? there is. I have been waiting several years for my deposit to be repaid.
Risdal: The last time you and I talked, we talked about how interest rates are really a business issue and how we understand what our competitors are doing before raising or lowering rates. I think that’s still the case, even if interest rates are as high as ever and faster than ever.
Stewart: yeah, exactly. As you know, banking is all about the net interest margin between what you collect from borrowers and what you pay to depositors. And that’s how we pay our staff and our investors, our utility bills and all that. Again, given what happened to mortgage rates and where they went, they could have doubled. So last week, the average mortgage interest rate fell to he 6.61%. That’s good news.
Risdal: Sure, but I’ll say it again.this is under to 6.61%.
Stewart: Mortgage rates have fallen this week to a national average of about 6.61%, down from 7.06% last week.
Risdal: But look, it was around 3% in January, right? You get a 30-year fixed rate of 3%.
Stewart: That’s perfectly fair. Yes, doubling. But what I meant was that deposit rates have more than doubled. About 1,000 times higher. Last time we chatted, you asked me about your mother’s CD. If she called her bank today — at least six months ago if she called our bank today. It should have been 1/4 percent on the 1980s CD, but now it’s over 3 percent. It’s real money for savers.
Risdal: I am obliged to call my mother. Besides, she would yell at me for talking about her finances on the radio.
Stewart: Ah, understood. sorry. I apologize.
Risdal: No, it’s okay. fine. What about the homebuyer walking in the door? Do you think demand is down because these rates have gone up?
Stewart: yeah, exactly. People can afford less. As you know, this is real money coming out of your pocket each month. But even then, inventory is still very low in the markets where we do business. As such, we don’t see much of a price change compared to what may be happening in other markets.
Risdal: And the same thing, kind of writ big too. One more thing, then I’ll get you out of your hair and get you back in business. And let me tell you that you are on the advisory board of the Seattle chapter of the San Francisco Fed.
Stewart: I am on the board of directors of the Seattle branch.
Risdal: all right.That being said, I think you can probably get one if you pull the strings [Federal Reserve Chair] Jay Powell on the phone. And if you could, what would you say to him?
Stewart: Well, I’m thinking carefully about my role here on that board. Here’s what I think: I think the Fed is very transparent about the direction of monetary policy. And I think they are committed. Everything we’ve read says Jay Powell is committed to moderating inflation.
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