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Experts say impact of Fed hike likely will be slight

By MICHAEL COUSINEAU
New Hampshire Union Leader

December 16. 2015 10:56PM




The Federal Reserve’s decision to raise interest rates Wednesday means the cost of doing business or paying the family bills will rise for some people.

“For the average consumer, it means they will almost certainly see loan rates go up very slightly,” said Bob Mahoney, president and CEO of Belmont Savings Bank in Belmont, Mass.

That means adjustable-rate mortgages as well as existing and new lines of credit most likely will carry a higher interest rate soon, Mahoney said.

John Mercier, executive vice president and senior lender at Primary Bank in Bedford, said businesses that fund their operations with working capital or lines of credit with a floating interest rate are likely to see a hike in the cost to borrow money, perhaps by one-quarter of 1 percent, matching how much the Federal Reserve raised its rate Wednesday.

“It’s not going to be a dramatic increase but part of the Fed’s plan to gradually increase interest rates over the next couple of years,” Mercier said. “I don’t see this halting demand for business lending.”

Mahoney said people with existing fixed-rate mortgages won’t be affected, but interest rates for new fixed mortgages are expected “to go up a little bit.”

“Automobile rates, which are at all-time low, will go up a little bit, maybe a quarter (of a percentage point),” said Mahoney, a former president of Citizens Bank of Massachusetts.

Credit card rates could climb for some people with variable interest rates, he said.

Interest rates on savings won’t change as much, Mahoney said.

“On the deposit side, I personally think it’s going up pretty slowly,” he said. “It’s called greed.”

Tony Bedikian, managing director of global markets at Citizens Bank in Boston, said it had been nearly a decade since the last time the Fed raised the federal funds rate.

“To put that in context, it’s been 10 years since the last ‘Star Wars’ movie was released in 2005,” Bedikian said in a statement.

In an interview, he said many business customers already had taken steps to counter the expected rate increase.

“For us, it’s primarily taking clients from generally a floating rate exposure on their balance sheets to locking in a fixed rate,” he said.

His advice for business people?

“We’re still advising our clients that have interest rate exposure that they have not yet hedged, we’re still at historically very low rates, and that it makes sense to take some of the risk off the table” and lock in rates, he said.

mcousineau@unionleader.com


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