Underlying Fundamentals, Low Rate Environment And The Opportunity It Presents
The 10-Year Treasury dropped below 1.0% and Lender’s 10-year fixed rate products dipped under 3% this week. Clearly, that presents borrowers who are in a position to refinance or have a loan nearing maturity with a prime opportunity to take advantage of the remarkably low interest rates. A borrower who locks in for 10 years can realize a significant impact on profitability over the long term, depending on the deal and leverage.
We believe this is an environment when relationships are built. The extraordinary turbulence in the public markets is being amplified by an unknown economic impact from the COVID-19 coronavirus situation, which led to an emergency rate cut by the Federal Reserve this week. Picking the right commercial real estate finance partner is vital because market uncertainty creates a wide variance in lender appetite and relative aggressiveness. A partner with access to the entire market ensures full coverage and can act as a buffer to the volatility being experienced.
Gantry has seen its share of market fluctuations over 30 years in the commercial mortgage industry. Whether the recent shifts remain a temporary blip or long-term change remains to be seen but what is known is during these times borrowers continue to seek access to the best rate lenders that deliver certainty of execution. While the strong market fundamentals and low rates present compelling reasons to borrow there are factors to consider before picking a lender.
Gantry’s Michael Heagerty said, “interest rates have moved from great, to unprecedented, in the span of a few days, an unbelievably fast change. The landscape is changing by the day and hour, making it critical for borrowers to tap into the resources of a group like ours that is closely connected with all lending options including insurance companies, CMBS and Agency lenders.”
Heagerty notes Gantry’s production team meetings regularly generate a collective pooling of input from 40 different production teams across five states that are constantly in the market. Ultimately, that results in critical access and knowledge for borrowers in the marketplace. He points out coupons may get to a certain point that certain lenders won’t go below specified floor rates, while other lenders may be willing to chase interest rates all the way down in an effort to win business. The opportunity to capitalize on this low-rate moment quickly is important for borrowers because it is in their best interest to improve their positions while the opportunity presents itself.
Borrowers that have the opportunity to refinance right now should be exploring the market in great detail. Every loan scenario is unique, with prepayment penalties to consider notes Heagerty, and our teams are well versed in providing detailed feedback to help make the best financial decisions. It is critical to refinance and capitalize on this opportunity sooner rather than later though, he advises.
Although the capital markets are compressing and the rate environment is unprecedented, there are aggressive lenders who wish to attract strong transactions for their portfolio or pool that may have eluded them due to the recent competitive environment. Borrowers must find the strongest partner to discover the leading and most credible capital opportunities for a given project.