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| John Oharenko |
Chicago,IL - As highly anticipated, the Fed unanimously voted to raise rates by a quarter point last month, the third
increase this year. The increase is part of eight consecutive rate hikes in
just over three years.
No rate-hike relief in sight due to a buoyant economy backed by a low unemployment rate staying below four percent, with no serious signs of slowing down along with tame inflation.
A ninth rate hike is possible before yearend. And as many as three to four rate hikes are expected over the next couple of years.
With fixed-rate debt at the forefront, popular funding programs offered by
major lending groups are outlined as follows:
* Agencies: Agency green programs will continue expanding, as such
debt represents about a quarter of their lending volume. Mezzanine programs gain significant interest, particularly for workforce housing, with as much as ten percent additional leverage available. Overall pricing starts in the 150-bps range over treasuries. As expected, floating-rate fundings are down, but still popular for value creation situations with pricing starting at 190 bps over Libor.
* Conduits: Active in the higher leverage lending arena with pricing
starting at 200 bps over swaps. Higher leverage loans above 75% LTV cost about 50 bps.
* Life Companies: Mostly satiated, as annual funding goals on target.
Staying competitive in the 145-165 bps range over treasuries on 65% LTV or less. Pricing premiums of 10 to 20 bps offered for loans of 15 years or longer.
The Real Estate Capital Institute's(r) director, John Oharenko, advises,
"Despite an impending inverted yield curve -- a strong indicator of recessions -- we are following a clear path of increasing rates based on current Fed policy."
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