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Banking Benefits to Higher Interest Rates

There are several reasons why higher interest rates can be good for the banking industry

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  • Written by  Banking Exchange staff
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  • Comments:   DISQUS_COMMENTS
Banking Benefits to Higher Interest Rates

As interest rates continue to rise, the president and most consumers are concerned by the anticipated negative effects coming from the new environment.  However, there are several reasons why this can be good for the banking industry.  

First, lenders have a higher incentive to loan when interest rates are higher and thus could help boost economic growth even further.  Rather than slow down home buying, this environment may incentivize potential homebuyers to actually take action.  

Secondly,  as interest rates rise, so can income for people living on fixed income such as savings accounts, CDs and retirement income products.  Minimal fixed income increases can have a very positive effect on purchasing power.   

Lastly, we are quick to forget that it was a stated objective of the U.S. government for decades that America supports a strong dollar.  Why was that the case up until recently? The reason is that a strong dollar can help the consumer because the currency is worth more in the global economy. Americans can purchase more and travel more for a lower percentage of their overall income.  

All of these potential results are excellent for the banking industry.  

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Time/Date: June 16, 2021 2:00 p.m. ET

The U.S. has come a long way in its journey to real-time payments, with TCH and Zelle in market and FedNow just around the corner. COVID-19 has accelerated that demand to move to real-time. Yet many financial institutions remain unconvinced of the need to move, with less than 3% of financial institutions signed up today.

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