November Fed Meeting Recap: Secure Financing Now
Once again, the Federal Reserve has met to set rates. And once again, we have seen another rate hike increase of 75 basis points. Our FBN® experts predicted last week that farmers should brace for another increase in interest rates and to secure financing before it hits double digits. This is the fourth increase in less than 6 months.
As the Fed continues to try to quell economic instability in the coming months, global markets will continue to be impacted by the ongoing conflict in Eastern Europe and rising inflation.
As interest rates continue to rise and the risk of recession looming in the near future, now is the time for farmers to evaluate their financing before rates hit double digits.
[Learn more about how the economic shocks of 2022 are affecting farmland values in our recent FBN Research report. Unlock the free report today.]
What it means for farmers
As the market continues to shift, we have been continually highlighting that Farm land real estate continues to be a good long-term investment for the time being. By locking in a rate now instead of 6 months from now, you’ll have a better chance to secure a lower rate.
As TJ Wilson, Director of Sales for FBN® Finance said last week, “As the line of credit renewal season looms, don't be surprised if you start to see rates in the double digits for operating lines. These rate increases will have an effect on the cash flow of operations year over year. You’re talking two and a half times the interest rate on some of these operating lines, if not three times, which makes a huge difference, especially given the price of inputs.”
Looking back at how rates have increased in just the last year, it’s more important than ever to act now to secure financing. In just 12 months, we’ve seen rates more than double compared to where they were in October 2021.
And as the market continues to indicate that rates will increase, it’s a good time to think about locking in a 10-30 year fixed rate. If rates drop in the future, you may be able to refinance and prepay at a lower rate. Locking into a secure rate now may be a good investment for many farmers. Check out our competitive land loan and operating loan rates which offer flexible term options.
While it’s hard to know where the market will be in 5 years, history has shown us that while rates are on the rise now, there will come a time when the yield curve starts to invert suggesting that rates will decrease in the future. “We are starting to see those longer term rates dip a little bit relative to shorter-term bonds. We're seeing a lot of people go with 5-year adjustable rates right now for that exact reason. They are anticipating that rates are going to be back down over the next few years and they're going to have an opportunity to refi on a longer term fixed and a lower rate,” says TJ Wilson.
Solutions to grow your business
We aim to make financing for family farmers simple and affordable. Every farmer has a unique situation therefore we provide a variety of options that may be useful in managing or growing your operation:
Operating lines will help you fund your operation as you see fit. With inflation impacting everyone, capitalizing on FBN’s special offer of 0% interest* on inputs may help you maximize your profit potential. To qualify for this offer you need to both complete the closing process for the operating line and have a FBN Direct® minimum purchase of $45,000 by December 9, 2022. Apply today and get your approval decision instantly. Once you have your loan you can easily use it to pay for FBN inputs in our Direct store.
Even though rates are high, the market is predicting they will rise even higher. Now may still be a good time to purchase that Ag land you have your eyes on. We want to help you finance your expansion, apply for a land loan now.
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Financing offered by FBN Finance, LLC and its lending partners and is available only where FBN Finance, LLC is licensed. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements of FBN Finance, LLC and its lending partners. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.