With a flat and low yield curve, borrowers’ demand for long-term fixed-rate loans is high. Furthermore, based on the forward market and most analysts’ predictions, the yield curve is expected to stay low and flat in 2020. The difference between five and ten-year loan rates is currently only nine basis points, and the difference between five and 20-year loan rates is 21 basis points.
Success in banking is simple. Offer the right product, to the right customers, at the right time. The timing now is perfect to accommodate borrowers who want long-term fixed-rate loans, and the timing is also perfect for banks to convert those fixed-rate loans to a floating rate asset to protect the bank. At CenterState we created a custom built loan product called ARC (Assumable Rate Conversion) program that is currently very popular with our own borrowers, and hundreds of banks across th
Commercial lending is currently very competitive with too many lenders suppressing margins and loosening credit standards. Community bankers need all of the help they can get, which is why CenterState Bank created the Knock Out Loan.
Until approximately ten years ago, interest rate loan hedging (using swaps) was prevalent for national and larger regional banks, but most community banks avoided loan hedging for various reasons. In the last ten years, more community banks have started to offer their borrowers some form of loan hedging option.