Experts say market can handle higher rates

by Donald Horne15 Dec 2015
“I think the economy will be slightly better than what people are thinking or slightly better than what the numbers have been showing now,” John Stumpf, chairman and CEO of Wells Fargo, told FOX Business Network. “If you think about it, we are at a 5% unemployment rate. Next year we are going to get into the fours. That hasn’t happened but maybe once or twice in my 40 years in the industry.”

Dr. Sherry Cooper, chief economist for Dominion Lending Centres in Canada, agrees that the economy is ready for a higher interest rate – especially as lower interest has encouraged high levels of personal and household debt through excessive borrowing.

“If they were to lower interest rates, that would only contribute to more borrowing,” Dr. Cooper told MPA, “and that is not where the economy needs help.”

For his part, Stumpf told FOX Business Network that a quarter-point rate hike won’t have an impact on his bottom line.

“The debate is bigger than the rate – that increase happens and some other increases next year – those are short rates; it will have a balancing of the curve or flattening of the curve and I think it’s going to any way dampen the demand for credit,” he said. “There’s always this belief that you’re going to kill the mortgage market – even if mortgage rates go up 100 basis points – that’s not going to kill the mortgage market.”

However, some see homebuyers slowing from their previous frenzied purchasing pace as an interest rate hike draws closer.

“People are a little more worried about the overall direction of the economy,” said Andy McCulloch, an analyst at Green Street Advisors LLC. “The frenzied environment has stopped.”


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