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| Jeanne Peck |
Chicago, IL --- Chicago-based Real Estate Capital Institute (RECI) reports that as the middle of the decade starts,treasury rates are drifting downward, with the benchmark
ten-year treasuries dropping nearly 20 basis points in December alone.
In
contrast to a year
ago, five year treasuries are slightly higher while ten-year
notes dropped a
half of the percent lower.
The tightening yield curve
usually indicates an
economic slowdown, but such signs are hardly evident as the
domestic economy
is healthier in the face of stagnating international markets.
Most economists are perplexed about rate movements,
especially those
predicting predicted higher interest rates. As recently as a
month ago,
numerous forecasts called for ten-year treasuries to
increase to 2.5% or
more, while earlier in the year forecasts of 3% or more were
common.
Certainly, 2015 will continue to be a challenging year for
forecasting
interest rate movements, but nevertheless, nearly everyone
agrees that rates
are near the bottom.
By all measures, now is one of the best times to take
advantage of capturing low interest rates, especially for
longer-term debt.
Mortgage markets clearly reflect rate euphoria for borrowers
as an almost
endless supply of funds flood commercial real estate
markets. As expected, mortgage spreads over treasuries are under intense pressure
to tighten.
Given the current oversupply of capital, spreads may drop
below 100 basis
points for premium-quality, low leverage funding
opportunities. For more "ordinary" deals, new spread ranges will likely be
25 to 75 basis points higher.
On the other hand, lenders are trying to maintain
"reasonable"
yields by instituting rate-floors for longer-term debt -
typically 3.75% to
4%. And should treasuries remain low throughout the next few
months and
assuming inflation fears subside, expect the removal of rate
floors.
Jeanne Peck, director of the Real Estate Capital
Institute's(r),, emphasizes that "2015 will be remembered as one of the best years
for borrowers to take advantage of extremely low interest rates."
Adding,
"If a deal does not
pencil out at today's rates, then move on ..."
For a complete copy of the company’s news
release, please contact:
Jeanne Peck,
Executive Director
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