Fed Shutdown Triggers Tightened Mortgage Spreads and Lower Rates

Jeanne Peck

Chicago, IL – The Real Estate Capital Institute reports the federal government shutdown resulted in another month of tightening mortgage spreads and lower rates. Loans are dipping below 5% for longer-term leverage on a more regular basis.

Funding sources scramble to identify attractive yields with lower risk profiles, but the dearth of capital leads to tremendous competition as noted by the following:

1.    Overall permanent mortgage rates start in the lower 4% range for 10 year funds, and about a percent lower for shorter-term five year funds. Such rates are about a quarter percent lower than the end of summer.

2.    Although overall rates are steady, spreads tightened by about 10 basis points for premier quality assets.

3.    More lenders are venturing into non-conventional property types, especially hotels, student housing, self-storage, etc. In many cases, these properties are now being reclassified as "conventional", especially for lower leverage financing which is often as competitive as for conventional assets.

4.    As a permanent loan arena is very crowded, more bridge lenders appear in the marketplace, particularly Wall Street and credit companies regularly competing with banks for such debt.

5.    Leverage rising for adjustable-rate mortgages and lenders tried to provide floors of 4% for ten-year debt on both fixed and floating rate product.

6.    Equity funds expanding into single family home development as housing prices rebound in many parts of the country.

7.    Class A, suburban office buildings gain more investor attention for both debt and equity as too many players are crowded out of the multifamily, retail and industrial sectors due to very low yields.

According to the Real Estate Capital Institute's Jeanne Peck notes,
"Borrowers are enjoying a resurgence of lower rates versus a midyear spike".

She suggests, "Now is as good a time as any to take advantage of low fixed rates and flexible floating-rate deals as lenders offer more leverage than in the past. It feels like 2003 to 2005 again".

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:

The   Real Estate Capital Institute(r)
3517 West Arthington Street
Chicago, Illinois USA 60624
Contact: Jeanne Peck, Executive Director
director@reci.com

http://www.reci.com/
www.reci.com