It creeps up on you…usually in a moment of desperation.
A prospect comes in and says “So and so bank down the street offered rate X. If you can get me a loan at a rate that is half a percent lower, then you have my business.”
Now you feel trapped. You want to close this deal, but you know if you lower your rate, the deal won’t be profitable…but you know if you don’t lower your rate, the prospect walk out the door and down the street to do business with your competitor—and then it happens…
You lower your rate to “buy the business.”
The temptation to rate match has become an epidemic in community banks across the country.