Tuesday, September 3, 2013

Mortgage Spreads Stay Steady Even as Interest Rates Move Upward

  


Chicago, IL, Sept. 3, 2013 - The seesaw battle between inflation
fears and lagging economic growth reflected the investor fears of August.
The last full month of summer witnessed rates steadily rise by more than 25
basis points for 5 year maturities as investors try to tackle uncertainty
based upon Fed Policy.

Even as interest rates moved upward during the past few weeks, most lenders
have held mortgage spreads unchanged.  Permanent mortgage rates for ten-year or longer debt are hovering in the 4.75% to 5.25% for most property types.

Shorter-term debt is readily available at 4% or below for the most part.

With another round of mortgage rate hikes, borrowers feel pressured to lock into fixed-rate debt.  On the other hand, lenders are trying to carefully match optimal rates with the proper yield profile as not to have too much long-term debt exposure, should rates continue rising.  Given such capital market conditions, expect more equity/participating debt programs to emerge
as lenders look for rate protection.

Commercial property markets recovery is choppy with major coastal and energy-related markets enjoying stronger results.  In the commercial
property markets, many businesses feel better about the economy. 

 As such,
tenants are starting to sign longer-term leases, and landlords report improving cash flow, especially in the industrial and retail sectors. Multifamily properties and hotels continue to enjoy better performance, but owners worry about rising expenses - especially from real estate taxes.

The Real Estate Capital Institute's Jeanne Peck suggests, "The remainder of
Jeanne Peck
the year will be more challenging as investors realize that rates have hit
bottom and are now on a rising trajectory."  She concludes, "Rising rates
are not necessarily bad, if accompanied by stronger economic growth for
better cash flow performance."
  
The Real Estate Capital Institute(r) is a volunteer-based research
organization that tracks realty rates data for debt and equity yields.  The
Institute posts daily and historical benchmark rates including treasuries,
bank prime and LIBOR. 

Furthermore, call the Real Estate Capital RateLine at
7RE-CAPITAL (773-227-4825) for hourly rate updates.

For a complete copy of the company’s news release, please contact:

Jeanne Peck, Executive Director
The  Real Estate Capital Institute(r)
3517 West Arthington Street
Chicago, Illinois USA 60624

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