Bankers are reluctant to lend money amid coronavirus and low interest rates


Manhattan, New-York. Shutterstock.

NEW YORK CITY – Although the Federal Reserve has cut interest rates to near zero, similar to measures taken during the 2008 financial crisis, bankers have held back new lending as the economic environment becomes more uncertain amid the coronavirus, Maria Avellaneda, a broker at Compass brokerage firm in New York City, told GlobeSt.com.

Although the Federal Reserve tries to stimulate as much liquidity as possible in the market in the short term, it has had the opposite effect. ” Bankers are very reluctant to give money ”, said Avellaneda. “We have seen different closings and with the way rates move along with the fall in house prices, they are asking a lot more questions.”

Capital markets are rightly affected, according to Avellaneda. Stakeholders flock to take advantage of low rates, often in the form of refinances, which creates increased risk in the market if they are unable to repay this debt. “Banks don’t offer rates close to zero, you always see them around 3%, ”she said. “Banks need certain margins to operate and they want to make sure borrowers can repay loan amounts.”

According to a recent GlobeSt.com article, Avellaneda noted some cCommercial properties risk seeing tenants default on their loans because tenants, some of whom are small businesses, have no income and overall transactions have slowed like never before near financial crisis levels. “We are reacting to something that is completely out of our control, it is not like the financial crisis and the way it was linked to mortgages and the specialists knew better about the measures and how to control it, ”she said. .


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