With the bank prime rate at 8.5 percent and the Fannie Mae 30-year fixed rate as low as 7-1/8 percent, interest rates are at a five-year low and the Federal Reserve has exhibited little willingness to raise them. The low rates have led a flood of homeowners to refinance their mortgages, but how are they affecting L.A. business owners? The Business Journal Forum asks:
Are lower interest rates making a difference for your business?
Oliver G. Santos
chief financial officer
AC Martin Partners
When rates go down, the costs of borrowing go down. If 1998 turns out to be a good year for us, we expect to be borrowing to finance our growth. So lower rates are good news for our company.
Steven E. Sheldon
Rainbo Records & Cassettes
It certainly makes a difference, especially in buying capital equipment. We happen to be looking at purchasing new compact disc presses at the moment. That kind of equipment is usually bought over a three- to five-year period. If you can lock in at a good rate, it makes a big difference.
vice president of planning and development
Southern California Healthcare Systems
We are a non-profit organization. Most of our funding comes from foundations and donations and grants, so temporary ups and downs in interest rates don't affect us so much. To the extent that interest rates affect the whole economy, we probably will get a secondary ripple effect if people remain insured and elect to have medical procedures.
We've been doing more deals. The lower rates are making the cost of funds for our clients more attractive. It allows them to carry more leverage, because they have to pay less interest. They're getting better structure and better terms.
James C. Ewing
president and partner
Seeley Real Estate Services
Absolutely. Lower interest rates encourage real estate investment. And as investment continues to increase, there are going to be expanded opportunities for us.
Kaufman and Broad Mortgage Co.
We've seen our business in Southern California increase dramatically over the last six months. There are a lot of people who have been sitting on the fence as the economy and job market have improved. With interest rates falling, it's creating an environment where it is the right time to go out and purchase a new home.
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