The Real Estate Capital Scoreboard™
Chicago, Illinois, June 29, 2007 – Funding volume remains steady despite concerns about the subprime lending issues. Currently, income-property permanent mortgage rates range within 6% to 6.75%, translating to pricing of 100 to 160 basis points above 5- and 10-year treasury yields. In comparison to May, shorter-term rates increased by about 10 basis points and long-term by more than 20 points. By the end of the month, the Fed’s decision to leave rates unchanged had a minimal impact on lowering rates. As a result, mortgage rates are steadily trending upwards.
While rates are moving upward, the mortgage yield curve is behaving more “normally” as spreads widen between short and long-term bond maturities. Swap spreads remain tight as many debt investors flock to investment-grade CMBS notes as a more popular benchmark index. Furthermore, swap markets are extensively used by many financial institutions (especially banks) for creating fixed-rate structures to directly compete with securitized loan programs.
The yield curve structure offers some attractive funding options. In particular, among the best-priced debt options in the today is the forward-delivery mortgage. Premiums as low as 10 basis point over the current rate buys as much as 18 months of rate-lock. Such spreads are nearly 40 basis points lower than only a few years ago.
John Oharenko, an advisory board member of the Real Estate Capital Institute, notes “Borrowers still have plenty of funding options available for most property types. From a historical perspective, leverage availability and underwriting standards are more liberal than any time during the past few decades.”
The Real Estate Capital Institute® 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.
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- The Real Estate Capital Institute®
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