We've written frequently on the reasons we think the market should not fear a rising lending-rate environment. The principal reason is that rising rates will likely come tethered to rising economic activity and job growth. The indicators so far this year lend credence to our hypothesis.

Rising rates also appear to be making more lenders less risk adverse. We say that because the Federal Reserve reports that more banks have eased lending standards across the major loan categories (and that includes mortgages) over the past three months. Yes, lending standards are still tight, but they are becoming less so.

Again, this shouldn't come as a surprise: Lenders need to calibrate the interest rate they charge for a loan and the risk embedded in the loan. To be sure, borrowers like very low interest rates, but when interest rates are very low, there is less incentive for lenders to extend credit because they're not being adequately compensated for risk.

Rising rates are frequently indicative of a stronger economy and more lending opportunities, which is why rising rates shouldn't be feared. On the other hand, rising rates mean rising borrowing costs, which is why clients should be fearful of remaining on the sideline.

Courtesy of Jessica Regan.

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