Commercial Mortgages: Real estate investment remains strong
By Andrew Little for timesdispatch.com
In recent years, fear of high inflation had many investors running to lock down long-term rates, but that has changed dramatically just in the past few months. While it is difficult to fully understand or explain market sentiment, two major shifts are making borrowers confident that low rates may be with us for a while so they can ride on floating-rate loans longer. First, there has been virtually no impact on long-term rates as the government has tapered down its bond-buying program. The second shift is weakness in global markets. The European Union is worried about not having enough growth so it is embarking on a bond-buying program. That is pushing the price up on EU bonds to a point where 10-year bonds from Spain, Ireland and Italy trade with a much lower yield than U.S. 10-year Treasuries. Effectively, this shift puts a cap on U.S. Treasury yields, which, in turn, keeps commercial mortgage rates low. And during the past month rates have remained low. They now range from 3.10 to 4.15 percent for five- and 10-year mortgages on lower leverage deals, according to the John B. Levy and Co. national mortgage survey. Conduit lenders continue to be competitive and offer 10-year rates in the 4.25 to 4.75 percent range.