Today’s Commercial Mortgage Rates

This discussion is regarding commercial mortgage rates for loan amounts between $500,000 – $10,000,000 and for owner user type loan requests as well as non-multifamily investment properties, such as office, retail, and industrial as well as special purpose properties such as restaurants.The good news is that rates are still at very low levels when looked at from a historical levels, however many of the indexes that commercial mortgages are tied to have increased dramatically in the last 30 -45 days.For example the LIBOR SWAP Rates have jumped up between 40 and 75 basis points in this time period. No one really knows why this is occurring as the FEDS are doing all in their power to reduce and maintain low commercial loan rates. You may have heard of the Quantitative Easing measures that have been implemented by Bernanke. Regardless of the reasons why, rates have gone up by.5% -.7%.Also related, and is good news, is the fact that conventional commercial mortgage lending is starting to come back, more and more. Over the last 2 years most of the loan programs out there have been backed by the government through such programs as the SBA. Now however, non-government backed loan programs are coming back and this means more competitive pressure in the market. Which translates into more loan options for borrowers, increased underwriting flexibility and a reduction in commercial mortgage rates on the banks margin side. More competitive pressure is the best news possible for commercial mortgage borrowers.This is because commercial loan rates have two components, one is the index and the other is the margin that the bank charges. The combination of the two is the “effective rate” or your rate on the loan. Currently, margins are at some of the highest levels seen in decades. At between 4 – 6%, compared to 1.25%-2.25% that was normally charged in 2006 – 2007. As the competitive pressures step up, banks will lower these margins in an effort to win deals. And bowers will enjoy more aggressive lending standards.

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