After more than two and a half years of interest rate hikes and an extended period of interest rates sitting at 5.5%, we have seen interest rate cuts at back-to-back Fed meetings.
While the current Fed funds rate sits at 4.75% – well above the 2019 peak of 2.5% – consumers, businesses, and the real estate market should start to plan their first steps in a lower interest rate environment.
Consumers see a more friendly environment for big purchases.
Already battered by inflation levels not seen since the 1980s, heightened interest rates have tacked on to some of the costlier expenses for consumers. Between mortgage rates reaching 20-year highs and unfavorable interest rates on loans to finance big purchases, like a car, the damage to consumer wallets accumulated fast. This is especially true in Augusta, where the median household income falls more than $12,000 below the national average.
Despite these headwinds, consumers may be in for some relief if inflation remains around the Fed’s preferred 2% mark and inspires the Fed to enact additional rate cuts. The lower interest rates go, the more opportunities there will be for consumers to finance big purchases at favorable rates and potentially improve business outcomes.
Business borrowing could see a bump.
Similar to consumers, Augusta businesses have faced unfavorable financing on loans they need to fund key operations and expansion opportunities. This is especially true for small businesses relying more on loans to access capital to help grow their business.
As businesses also look to recover from the devastation of Hurricane Helene, additional Fed rate cuts that further lower interest rates represent a significant opportunity for businesses to access capital and make crucial investments through short-term loans secured at favorable interest rates.
Augusta real estate stands to benefit.
While the real estate market has also taken a hit due to elevated interest rates, there may be opportunity on the horizon. If inflation remains around the Fed’s target and officials continue to cut rates, favorable mortgage rates could be on the table for consumers and businesses looking to buy real estate. With the Augusta population projected to grow by more than 26,000 people over the next five years and better mortgage rates potentially on the horizon, the Augusta real estate market could see a considerable boost following the pandemic slump.
It’s no secret that the Fed’s latest rate hike cycle limited financing options for Augusta consumers and businesses and stalled growth in the city’s real estate market. However, with further rate cuts potentially coming, consumers and businesses should be on the lookout for beneficial financial opportunities.
Kevin Glass is the Augusta Market President at Synovus Bank.
Gary Woodhurst is VP Commercial Banker at Synovus Bank.
