US Federal Reserve hikes interest rates by 0.75%
(CNS): The US Federal Reserve enacted its second consecutive 0.75% interest rate increase on Wednesday, taking its benchmark rate to a range of 2.25% to 2.5% following a two-day policy meeting. In an effort to tackle soaring inflation, Fed Chair Jerome Powell said the increase was essential and there will be more to come to bring down the cost of living.
Here in Cayman, borrowers can expect to see their loan payments increase in a matter of days as local banks adjust their prime rates in line with US rates.
Interest rates offered by Cayman’s high street banks are already priced well above the federal rate and the increase resulting from this latest change will hit families with mortgages and other major loans hard, given that the cost of living in the Cayman Islands is already far higher than in the United States.
While most families were looking forward to a reduction on their CUC bill this month as the government’s summer subsidy comes into effect, the increase in interest rates could wipe out that anticipated saving and place more families at risk of losing their homes.
The government is also funding the Cayman Islands Development Bank’s cut-rate loans offered to Caymanians to buy a home, land or refinance an existing mortgage. The CIDB has begun lending money as low as 3.75% interest on 30-year loans for those borrowers who qualify for this low rate.
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Category: Banking & money, Business
in this day and age, real world economics should be taught as vigorously as math and english. too many of us leave school with no real understanding of the world and the financial instruments available to us.
“Maths” not “math”, let’s keep standards up.
How the heck is the average homeowner supposed to cover so many interest rate increases in a single year? And when the foreclosures start happening – not because people aren’t living within their means – but because of these ridiculous rate hikes, what then?
If salaries were increasing as well it would help to cushion the blow, but that’s not happening. So what do we do? Just stand by and watch the banks take the homes we’ve invested in for years and sell it off to some foreigner?
Kenny was right! He was speaking up for the common man and you all laughed. At least someone was speaking up!
The US Fed is focused on taming its own inflation. What happens in Cayman is not their concern. Your rant shows your lack of understanding
You lack the understanding that banks here lend at a huge spread. They would rather foreclose than take a hit on the spread. Just look at mortgage interest rates around the world.
You completely missed the point. The fed does not care about what happens in cayman, as they are focused on taming inflation to improve the lives of their own population within the US. If you still have a problem, set your own monetary policy or vote for politicians that will make that change.
You missed the point. As CNB announced, they will not be increasing their rates. My point exactly is, Banks can choose not to increase.
The U.S. is in recession. Two consecutive negative quarters means recession.
I’m not sure I understand how a couple of % rate hikes will result in foreclosures. For the most part, your mortgage payment will stay the same – it just means more of your payments go to interest and less toward principal.
The reality is that if someone can’t make their mortgage payments it’s usually because they lost their job or for some other reason. So far, despite the recession, people aren’t losing their jobs.
And, frankly, even if someone’s mortgage payment went up a couple hundred dollars a month, if you can’t weather that increase, then yes, you’re living beyond your means.
The bank doesn’t want to take your property and sell it to some foreigner – they want you to make your payments.
If you can’t handle a variable mortgage, get a fixed rate mortgage. If this concept is too complicated for someone to understand, then they’re going to have bigger problems in life than increased interest rates.
@ 10:36PM
You are not entirely correct/wrong.
“I’m not sure I understand how a couple of % rate hikes will result in foreclosures. For the most part, your mortgage payment will stay the same – it just means more of your payments go to interest and less toward principal”
In some cases the bank can’t/won’t spread the increase rate to just the interest portion of the mortgage to avoid a total monthly repayment increase. The person’s age may disqualify this approval. Therefore the aggregate payment (Int+P) increases. Also, a fixed rate mortgage is only fixed for a few years.
“If you can’t handle a variable mortgage, get a fixed rate mortgage. If this concept is too complicated for someone to understand, then they’re going to have bigger problems in life than increased interest rates”.
“Hubris is blinding”. You seem to not quite understand it either, and you’re probably doing just find in life. Well, I hope you are.
The struggle is real. Thank you for explaining the realities to that person who doesnt seem to be negatively affected by rate hikes to the same degree that many working class Caymanians are.
No the mortgage payment goes up and more of it as a % is paying interest.
The issue is the lack of any sort of fixed product for even a small period of time such at 3-5 years as is common in many other markets.
Unfortunately not. My mortgage payment has NOT stayed the same. its already gone up by $600 due to the last increases – more than the ‘couple hundred dollars’ you arrogantly assume. If it keeps going up and up it wont just be me that has difficulty making the higher payments. Others will be in the same boat. Eventually thats what leads to foreclosures.
Sounds like you’re doing just fine and insulated from the hikes that affect the rest of us. Good for you!
If you cant afford your mortgage by definition you’re living beyond your means. Did you expect rates to stay a zero for ever? My first mortgage was 8%.
The rate of change in unprecedented and many of the loans from a number of years ago are already past the level that the bank’s were stress testing them at.
For recent loans the payment has jumped and there hasn’t been an opportunity to build up an equity cushion incase the inflated prices of the last couple of years drop.
So we could have many homeowners and therefore banks underwater on these deals…
And now you see the effect of what BS, pointless lockdown policies (which did nothing to stop the virus) resulted in…
Reap what you sow.
Rates will move another 2% by Q2 next year. F
Cayman’s property market will soon implode. Luckily for those that saw this coming and parked their cash, will pick up Cayman property on the cheap when the carnage is over.
I remember when the interest rates were like 18%.
You were supposed to lock in a fixed interest rate and save extra money rather than buying the latest iPhone. If you did not, do not expect your fellow Caymanians (who did just that) to bail you out.
🇵🇳 😂 😂 😂 🇺🇸
Translation: Prepare to pay more. Enjoy your Bidenomics.
I’m still waiting on Reganomics pipe dream and wishes of Trickle Down Economics/money (aka as Grift) by taxing the rich less, cutting their taxes because someone told Ronald they then would go out and spend more monies. That in turn would be helping the middle and lower income classes. Hahaha, Suuuuuuuurrre.
The rich savings, less taxed benefits went to yacht builders and land sellers et al.
Yep, Biden inherited a poor US economy, war and pandemic, yet still he’s a better choice than the Orange Tyrant.
Pay up sucka!
Yes. Don’t believe your lying eyes. The economy is great.
Hes the same as Trump, but less entertaining.
My dog is a better choice than that disgusting piece of MAGA s#@t!
Sorry, the inflation belongs 100% to Sleepy Joe and the extra trillions he spent on giveaways. Reagan did a great job of taming Jimmy Carter’s inflation, cutting taxes and freeing up the economy.
Hope Reagan is enjoying Hades
@3:21. Why don’t you rush back to tRUMPs TINY hands🤣
You don’t understand much do you?
How can it be “Bidenomics” if the Federal Reserve acts completely independent? 😂 If you are blaming the current administration for inflation in the entire world as seen on FOX News, then the Federal Reserve is clearly acting within its authority to set rates to slow inflation to an acceptable level based on research presented in the FOMC. I didn’t realized that the US was responsible for the global inflation problem. 🤣😂🤣😂🤣😂
If you refinance a loan from the commercial banks with another mortgage the commercial banks will penalize you. Will the commercial banks be waiving those penalties if refinanced with CIDB?
Why would they? Thats the point of the penalty, to lose as little money as possible if you switch banks. IF they were giving socially responsible loans they would be giving fixed rate based on the cost of the money (interest rate) when they made the loan. (Think about it, they give you $100,000 yesterday, the Fed change rate today, they’re not borrowing $100K tomorrow to re-lend to you so why does your rate go up?) But everyone wants their pound of flesh.
Obviously the point is to keep your payments relatively steady in real terms given inflation essentially results in you paying back your loan with cheap(er) money.
How would a bank survive if it fixed all of its mortgages for their entire duration when inflation is double that, and the cumulative effect over decades results in you paying pennies on the dollar? Raising their bank fees dramatically may be an option ($50 to withdraw money anyone?), but it’s also likely they’d reduce the maximum duration on mortgages to a handful of years to minimize the inflationary value erosion. Good luck qualifying for (much less servicing) a 5 year mortgage even on a low fixed rate.
Would you willingly take a job that will continue to pay you the same nominal dollar figure for the next 30 years? I might consider if it pays $1,000,000… otherwise good luck retiring when a loaf of bread costs $20 and you are still making $10 an hour in 2052 just like you were in 2022 when a loaf of bread was $5.
Alternatively, would you prefer banks raise / lower their interest rates not based on the reactionary, predicable, and relatively muted Fed rate but on the constant and volatile movement of inflation itself? Mortgage rates in the double digits overnight doesn’t sound very appealing.
The bank keeps .05 to .10 cents per dollar in the bank and then lends out the rest.
So no. The banks aren’t poor.
Absolutely no reason a bank can’t offer fixed rate mortgages for the duration of the loan. 10-15 year fixed rates are common in the UK and are perfectly simple for the bank to hedge with swaps if they fear higher base rates.
They lack product innovation skills.
I have had multiple 30-year fixed rate mortgages over the years in the US. My son and daughter have them now. Paid mine off a couple of years ago.
Economies of scale, greater ability to diversify geographically, amongst many other factors… especially considering that’s not the only product they offer. The poster above advocated banks should offer *only* fixed mortgages. If they did that the rate would so high it wouldn’t be attractive as they’d have no variable mortgages to use as a hedge and too small of a market to diversify.
The poster above indicated *all* mortgages should be fixed, and clearly the expectation here is a 30 year duration. No bank would offer purely fixed mortgages for 3 decades unless the fixed rate was so high it was completely unattractive.
8:30 – Not true. Fixed rate mortgages in the US are fixed for the life of the loan…all 30 years. I actually have one.
Oh, and let’s not forget even if you have a fixed rate mortgage (if that indeed exists in Cayman) you might have a car loan or carrying a credit card balance those rates will increase as well. So when you go to buy that $75.00 CI tank of gas remember you better payoff your monthly CC bill. There are no free lunches although our PACT officials look like they haven’t missed many😂😂😂
credit union does a fixed rate
We don’t all have a close family member as a civil servant. Therefore i can’t open a credit union account.
Second pension withdrawl!
How do you plan on repaying the a proposed secondary drawdown? By increasing the mandatory payment, which yields less monthly income, yea that makes no sense! Christ can people not attempt to live within their means.
The pension schemes aren’t very good anyway. I would much rather withdraw and invest myself.
I hear you but most money will go to a new dar.
True. Especially Chamber plan. How many big businesses are delinquent in paying the pension funds deducted from staff. Why is there no accountability?
The Biden administration is doing everything possible to not declare a recession. This week the talking heads and the complicit press are attempting to redifine the definition of recession.
Don’t fall for it. His administration is an utter and complete joke, juat like every American president before and every preaident to come. No significant action on climate change, no action on gun control, and a worse than Trump Covid policy. Just Reagan in a new costume.
And now corrupt insider trader Nancy Pelosi’s trip to Taiwan has gotten all of the neocon warmongers in the states on board for a very stupid and very dangerous saber rattling standoff with China.
Oh get over it
Bless
When walmart issued a profit warning a couple of days ago that should of rang very large alarm bells with people,but nope i guess cnn lefty news dont want to report on that huh.
Except, mush for brains, CNN did indeed report on it…extensively. That’s where I learned all about it.
Putinbot or idiot? I’m calling Putinbot.
Both
Typical liberal trope. One can criticize America’s leadership without being a “Putin bot”.
All American presidents are horrible. All politicians in America are horrible.
Just to clarify some of this article’s content, the US Fed funds rate is the rate banks in the US lend to each other on overnight deposits. The rate itself is not specifically relevant to the general public as it is not an accessible rate. No one in the general public can borrow at the Fed funds rate.
What is relevant to the public is the US PRIME RATE, which is the rate US banks will lend to their most creditworthy customers. The prime rate is typically 3% higher than the Fed funds rate. So when the Fed funds rate moves, so does the prime rate.
For Cayman banks, they benchmark their prime rate to the US prime rate. So the Prime rate will move in the next few days by 0.75%.
(If you ever looked into financing, you will hear the term “prime” or “ prime plus 1” etc).
Those people with adjustable rate loans were not complaining when the rates were going down so they should not be complaining now when rates are going up. Those are the terms and conditions that they signed up for.
The truth here is that many people who have home loans are not prepared for home ownership or the potential risks that come along with long term economic cycles.
It is time for many people to do a reassessment of their personal and financial position and honestly ask themselves if home ownership is for them. If being honest with themselves, many people will conclude that they would be better off as life long renters.
It’s a difficult thing to accept but it is the reality that most people need to face in these difficult economic times.
These aren’t really difficult times. Notably less affordable to middle classes in grand scheme. Fuel prices have been higher before, and generally most of the world is in peacetime mode. The Fed is already walking back hawkish stance – they hiked so they have capacity to ease to perhaps mitigate recession. Messaging already telegraphed to the bond market. Meaningfully addressing the nations/institutions fuelling GHG and climate change will be a difficult and expensive retooling of mindsets. That’s the part that is hard to accept, even on Earth Overshoot Day.
We shouldn’t be complianing,exuse me but your wrong.when rates went up,the bank increased my payment,time passed and i continued to pay the higher paymen,the reate dropped 4 timmes,not a word from the bank.3 mths ago i spoke to my loan officer about somthing an broght this up,i was told it was my job to contact the bank and request a reduction.exuse me we shouldnt complain ?.downright dirty is what that is .
I think you have to contact them if you want to reduce the payment but if not, they apply the difference to the principal meaning the loan can be paid off sooner
Nope. They will not reduce principal unless you tell them to. They will apply it to prepaid interest. Big difference.
While I kind of hear what you are saying, it would be heard better if leavened with some empathy for people hit with whatever combination of COVID/Costs financial hardship.
No one is better off as a lifelong renter. (Home ownership, including owning your own apartment, leading to property ownership, is still a major component of building generational wealth.) But many people will be forced into being lifetime renters through shortcomings of the socioeconomic system. But you are right that renting is better than a foreclosure.
Not a thing wrong with renting as long as the landords are honorable.
The “everyone should own a home” is great marketing for the real estate and finance industry across the world.
The mortgages go up but the savings rates for savers remain the same! Local banks…don’t you just love them?
Economics is astrology.
Along with weather forecasting and Tarot card reading
Adventures in grownupland.
Capitalism sure does need a lot of governmemt assistance in America.
Sure, some temporary safety rails and minor course corrections here and there, but largely functional and honouring the freedom of residents. Socialism, Marxist, Authoritarianism are 100% regime intervention all the time. There is no more expensive method of governance than that. I’ll take the Pepsi Challenge on that any day.
2008-2009 American housing crisis?
Cash for clunkers?
Bailouts to Wall Street?
Sure seems like American capitalism is very much propped up by government.
As far as other countries you dont agree with, China also bailed out their stock markets in 2008-2009, even shutting them down, but wise policy and a global stranglehold on cheap consumer goods has made their form of communism very successful for the people and the country and it won’t be long until China is the global leader in GDP.
Favored US industries are propped up. Same everywhere. The China story is not yet written. It will be interesting to see, but the outcome is not guaranteed. The Party is stealing a lot and may have to pay later.
Lol. What rubbish. Chinese gdp/capita is 8k a year compared to the US at 65k. Over a billion Chinese live in what we would call abject poverty.
China has the world’s second-largest nominal GDP in current dollars and the largest in terms of PPP.15 With annual growth that consistently outpaces that of the United States, China may be on track to become the largest economy in the world by nominal GDP in the years to come.
https://www.investopedia.com/insights/worlds-top-economies/
Since the 2008 financial crisis, one-third of all growth in the world’s GDP has occurred in just one country: China. In 2020, China supplanted the U.S. as the home to the largest number of the most valuable global companies on Fortune’s Global 500 for the first time.
Mar 23, 2022
https://m.statisticstimes.com/economy/united-states-vs-china-economy.php#:~:text=The%20economy%20of%20China%20is,in%202019%20it%20is%2067%25.
Will this cause Cayman housing prices to go down or is the Cayman market so flushed with high net worth foreign capital that the housing prices will continue to rise?
Maybe Government needs to authorize a 2nd pension fund withdrawal to help until inflation and cost of living comes down.
And what, prey tell, will you live on when you retire? Or will you be relying on government support in your old age? Pension withdrawal is a terrible idea. Short sited and with long lasting consequences.
Can someone who really understand these matters please tell me if my fixed deposit interest will go up.? Please only knowledgeable persons respond!
Nope. You’re locked in for the term you agreed to based on amount and time. If you elect to ‘roll’ into another TD at maturity then you will have current market rates….whether up or down
By that thinking isn’t my mortgage ‘locked in’ too? I borrowed a set amount and signed a paper to pay back a set amount.
The interest rate that was in effect when I signed up for my mortgage should apply for the duration of my loan.
And if interest rates have gone up, why is the bank not paying a higher rate of interest on funds held in savings accounts? if interest goes up it should be across the board, not just to benefit the banks
Read the terms
Yes but only the next time it rolls/matures as your rate is set for the term of the deposit. Make sure you ask for a new rate as some banks will roll your term deposit at the previous rate.
It will go up if it’s in the USA. Here in Cayman the banks gouge you are every turn, charging fees for everything (the most recent was when I took out USD cash from my USD account using a teller – the ATM was out of cash, but the teller told me there was a charge!). The latest quoted are for a 3 month deposit us .5% at Butterfield. Man, are they making money! Great for their investors but terrible for customers.
Retirement? Must have been a nice dream you just had.
YOU dont have to pull it out if you are concerned. if people are asking the same as you, they too do not need to pull it out.
But why for the love of god are you policing other people’s pockets? If they gave the OPTION for a 2nd withdrawal why are you concerned about MY retirement? I certainly dont care what you want to do with your money.
youre asking things that dont matter to you. If you dont wanna withdraw then DONT, if you want to then GO AHEAD
cig will cover it…they will just write more checks for caymanians.
If only the checks were reserved for Caymanians. That is what the law requires. That is not what is happening.
“Cheques” not “checks”. The Union Jack flies on the flag not the Stars and Stripes.
And yet we observe speed limits in MPH and weather in F?
Hate to have to be the one to break it to you but speed limits across the UK are in MPH.
And peg our currency to the USD
My god, it is terrifying that people this stupid are allowed on then internet.
You can take the Union Jack and shove it up your imperialist a$$
People like you can’t help yourselves and it brings down the level of discourse.
It is “arse” not “ass”. The Union Jack flies on the flag not the Stars and Stripes.
And how proud you must be.
Hate to break it to you but the Union Jack doesn’t really mean much these days. They just due as the US says. Stars and Stripes it is! 😄
🇵🇳 😂 😂 😂 🇺🇸
Isn’t this article about the US Federal Reserve raising the interest rate? I think we should stick to “checks”.
The comment was about spending by the CIG, so “cheques” it should be.
Get the tissues out Kenny.