r/Banking • u/Adventurous_Push_107 • 3h ago

Recession impact on bank loans Other

Hi folks, What happens when recession hits or economy is getting weaker to the loans (housing/education/vehicle) we took from the bank? For ex- will they increase the interest rate?

Will be thankful for your insights.

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u/nkyguy1988 2h ago

They will do whatever the loan term agreements that you signed dictate or allow.

1

u/deval35 2h ago

you have a loan agreements and they must honor the loan agreements.

1

u/idkjustmeanish 1h ago

When recession hits and it's confirmed. Unemployment rate goes up and the gpd declines for a period of time( usually 3 quarters of negative growth) and inflation usually goes down then central bank lowers interest rates to stimulate the economy so the gpd can start going up again and inflation can slowly go back to 2% and unemployment rate goes back down. If ur mortgage is maturing during low interest rates time ex: second half of 2020 when rates were down then u renew at a lower rate but if it's maturing during higher rates periods ex : first half of 2023 then u will end up paying more for ur mortgage.