The Fed is fed up with our spending habits. We consumers are consuming at a rate that apparently can’t keep pace with production. If you have a finger to point, you may be stymied about which direction it should target. Should it poke the Russian Bear that marched on into Ukraine and announced their intention to stay? What about the pandemic, a reduction in production, a supply chain broken, Amazon promises, and a desperate need to fill ones time? Oh there are so many places we could go to place blame, if placing blame is what we are intent on doing?

The whole thing had me stewing, primarily because I too like to buy, but rather than surf the web in summer, I like to cruise the open houses and I happened to be in the market for one. All the while the Fed was reaching into their tool box and pulling out the only tool they had to tamp down inflation and up went the interest rates. My two bed condo dreams were dashed, alas it seems I would be destined to live a one bedroom existence. I find some solace in the fact that I live alone, and don’t have visitors often, so practically speaking don’t need two bedrooms. Need aside, the upside potential of a two bedroom condo far exceed that of a single. Humph.

I’d be feeling a little sorry for myself if I wasn’t getting such a fabulous one bedroom, and significantly a very good interest rate, one tool titans, I have a trick or two up my own sleeve. I am no finance expert and understand that there is much in fact that I don’t understand at all. I have long been fascinated by the fact that the mere mention of a rate increase gets banks scrambling to hike their rates in advance of the actual announcement, which got me thinking that it wasn’t a law that required them to raise the rate, so what compels them to do it?

Big commercial banks are tied to a rate range for their overnight loans – the loans they make to one another, and to requirements for liquidity set by regulators. This forces compliance which trickles down to we average buyers, looking to get loans for cars and boats and houses and such. In my years of shopping loans, I discovered that working with small banks was easier, faster, less cumbersome. In my most recent transaction I learned that there is another benefit. Small banks don’t sell your loan, at least not as a matter of course. They are in the business of holding it and using the money they receive from your down payment, and others – to lend. They want and need to attract borrowers to keep their business moving and few things are more attractive to a borrower than an incredibly competitive interest rate. When others were offering 5%, I shopped and discovered 4.75, then 4.25 with a small bank out of Maine, and finally 3.99%, which as I like to say, is not nothing!

In conclusion I would like to say I still have no idea how the Federal Reserve operates, and why they have so few tools to address inflation, but I implore you to support small banks if you are in the market for a home.