The Bank of America (BofA) executive in charge of RV industry-related lending believes the Federal Reserve’s decision on Jan. 3 to lower interest rates “is real good news for the industry.”
The fact the Fed stated it has become more worried about a recession than about inflation means the Fed might lower interest rates again in late January, said Chuck Baynard, president of the BofA Specialty Group, which is a source of loans to retail buyers of RVs and of inventory financing for RV dealers.
“Things look a lot better than that they did a week ago,” Baynard said during a conversation on Jan. 5. “The big question is the impact this will have on consumer confidence.”
Economists generally believe it takes three to six months after an interest rate decrease before conditions improve, but Baynard said conditions could improve earlier, particularly if the stock market rises.
Late last year, RV dealers were cautious about ordering more units from the manufacturers, but the Fed’s decision to lower interest rates now makes Baynard think dealers will order about as many units during 2001 as they did during 2000.
As was the case with most banks, BofA lowered its benchmark prime interest rate to 9%, from 9.5%, soon after the Fed announced its interest rate decrease, Baynard said.
BofA’s RV retail loans carry fixed rates of interest, but some of its dealer floorplan loans are indexed to the prime rate, which means some of its RV dealer customers have already seen a reduction in their interest expenses, he added.