As expected, the central bank cut interest rates on September 18, 2024. However, the half-point cut was more than many people anticipated.
“We concluded that this was the right thing for the economy and the people we serve,” said Jerome H. Powell, the Federal Reserve chair. Some experts surmise that the half-point cut was done to make up for the quarter-point cut a Fed didn’t make in July. Powell has not confirmed or rejected that assumption.
Several Fed officials – including Governor Christopher Waller and Minneapolis Fed president, Neel Kashkari – indicated they are likely to support quarter-point cuts at each of the next two policy meetings.
So, do you refinance now to take advantage of the lower-rate environment or do you wait to see how many more cuts the Fed will make? It’s a tough choice, especially if your agency is doing well, and you are in an SBA loan with a rate in the double digits.
Refinancing into a fixed rate now can help you capitalize on immediate savings and improve monthly cash flow. Alternatively, you may seek to refinance into an adjustable rate loan with a short-term variable period, then adjusts to a fixed rate. This option may allow you to take advantage of the predicted future rate reductions if they occur.
The central bank rate is only one factor that goes into the interest rate for loans. Explore the other factors here.
Every agency owner’s situation is unique, so there isn’t a one-size-fits-all recommendation regarding refinancing. However, it is certainly worth exploring with the experts at First Mid who specialize in financial services for insurance agencies. We’re here to support your agency’s comprehensive financial needs.
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