Garnet Capital Advisors Blog

Interest rates still remain extremely low, with economists long awaiting an uptick.

Federal Reserve staffers see economic growth dropping from 2.41 percent in 2016 to 1.73 percent in 2020. They also see inflation increasing to 1.97 percent by 2020, lower than the central bank's target of 2 percent.

To make the forecast even more bleak, new home sales sank 6.8 percent in June in the US to a seven-month low.

While the US is not in a recession - and isn't expected to be any time in the near future - it's still not experiencing the type of growth that economists would like to see.

If this pessimistic outlook on the economy is validated by future data, there could very well be a much lower medium-term growth rate for the economy in the US compared to what has typically been assumed by economists.

Mixed Feelings About the Health of the US Economy
While there are certainly a fair share of those who have a gloomy outlook on the economy in the US, there is other data that offers a hint of hope.

Despite new homes sales falling to new seven-month lows, resale homes appear to be strengthening. A recent report showed that home resales spiked in June to the highest they've been in eight years.

Now is as good a time as ever for lenders to ensure the strength of their loan portfolios.

With a tightened labor market thanks to demand from young adults, and an ease in lending conditions for first-time buyers, home resales have helped the economy remain on solid footing.

According to a Reuters survey of economists, the Federal Reserve will most likely be bumping up interest rates twice this year, with the first hike to take place as early as next month. And unemployment has lightened, with the number of Americans filing new unemployment benefits' applications dropping to its lowest level in over 41 years.

What Does This All Mean For Financial Institutions and the Loan Market?
With such a mixed perception of the economy in the US, now is definitely a time where lenders must keep a watchful eye on their loan portfolios. While a healthy economy means that loan portfolios perform better, a sketchy economy makes it more important than ever for lenders to keep close tabs on the state of their loan portfolios.

Lenders and banks should understand the need to regularly quantify portfolio risk, and remain conscious of the impact that new loan commitments can have on their balance sheets.

Banks and lenders who seek outside expertise can benefit from objective and expert recommendations and reporting on the condition of their loan portfolios. It's critical to have high-quality portfolio information in order to be able to make better loan decisions.

This is where Garnet Capital can come into play. We can help lenders and financial institutions develop and refine a defined scope of review of loan portfolios in the loan market, and detail what should be included in them. Having a strong loan purchase and sale strategy in place is critical for smart lending and safe market growth.

For more details on how Garnet Capital can help you successfully manage you loan portfolios, visit GarnetCapital.com today.