Interest rates are rising and rising. See what Tampa Bay banks see coming.

The news that the US Federal Reserve raised interest rates by a quarter was not a big surprise to Tampa Bay bankers – the move was widely expected as a measure to reduce persistent inflation.

The Fed has not finished either, pointing out that interest rates are likely to rise several more times before the end of the year, pushing the key interest rate above 5 percent or even 6 percent.

The question now is: How much higher will interest rates be before local customers reduce their borrowing?

It may be higher than you think.

“At one point there was a lot of talk about the Fed raising it by half a unit instead of a quarter,” said David Mastrorio, executive vice president and chief lender at First Citrus Bank in Tampa. “So the market at one point basically figured that was going to happen, and it didn’t – it was actually less. “Therefore, I do not think that just one interest rate hike or maybe even some interest rate hike will have such a significant impact.”

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The Fed’s increase pushed the key interest rate, or the best interest rate borrowers usually receive from their lenders, from 3.25 to 3.5 percent. By the end of the year, this could exceed 5%.

But for now, the rates are still relatively attractive. Customers inside and outside Tampa Bay have not stopped borrowing.

“Interest rates are still good,” said Tom Zernick, president of First Home Bank in St. Petersburg. “We are in an environment of such low interest rates that some of the normalization of interest rates that we will see during the year is much better than interest rates have been historically all these years.”

Michael Hartman, senior lending vice president at Suncoast Credit Union, said he had seen a slight decline in mortgage activity since the beginning of the year. At the same time, however, members are actively refinancing their mortgages or seeking mortgages to generate some cash flow.

“Because of the rising value of housing as it has grown over the last year or so, people have access to these equity through mortgages,” he said. “We have seen an increase in this market.”

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For buyers of new homes, members are still trying to lock in 30-year fixed-rate mortgages while interest rates are still relatively low. But as the key interest rate stands at 4.5 percent or 5 percent, Hartmann said more people will look at loans with adjustable interest rates more.

“This has always been the historical pattern, so we would probably expect this to continue,” he said.

On the business side, lending remains strong, even as banks have processed hundreds of billions of dollars in forgivable loans from the U.S. Small Business Administration Payroll Protection Program.

First Home Bank does a lot of work through the agency, which offers floating loans to companies that may have trouble securing loans from other lenders. While these loans are volatile, not fixed, they usually require lower down payments and longer repayment terms, which makes them attractive even during interest rate hikes.

“In my SBA lending history, which spans three decades, I’ve worked in environments where the prime rate was 6 percent, 7 percent, and you know what, businesses still need capital,” Zernick said. “Once well-structured … people are still borrowing, growing and expanding.”

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Instead of circling their financial wagons, some companies are seeking to invest in real estate and infrastructure, Mastrorio said, so they are ready to hit the ground running when winds such as workforce retention, supply chain slowdown and inflation slow down. .

“Most of our customers tell us that demand is there,” Mastrorio said. “A lot of what we are looking at is for businesses to expand – a lot of loans to acquire new property or to build a new facility that will continue to allow their business to expand. That’s a lot of what we’ve been seeing for the last 12 or 18 months or so. “

Zernick said now is the time for homeowners and business owners to review their debt schedules in general terms, from credit card bills to car or business loans. If any of these are linked to the Fed’s key interest rate, “they need to see if they can consolidate and refinance into a lower interest rate product and help their cash flow in these inflationary times,” he said.

“It’s a great time to give your business a financial boost and give yourself one,” Zernick said.

If you can do it before the rates rise again, so much the better.

“Rates are obviously historically very low, no matter where they are today compared to six months or 12 months ago, or even six or 12 months from now,” Mastrorio said. “It simply came to our notice then. So, if my plans are to do something, the faster I do it, the lower I would get. “

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