NEWPORT BEACH, CA—How will an anticipated interest-rate increase over the next few months affect the financing landscape for the third quarter? MetroGroup Realty Finance's founder Patrick Ward weighed in on the subject exclusively with GlobeSt.com and gave his take on emerging trends in the financial market.

GlobeSt.com: What do you anticipate the financial market will look like in Q3?

Ward: There are two driving factors that will define the financial landscape in the next quarter. First, the amount of capital supply available in the market remains strong, continues to grow and by all reports from the lenders that we represent, remains very competitive. However, over the next few months, we anticipate the recent 50-basis-point increase in rates will remain at these new levels. We don't see this minor increase in rates at a level that it will affect momentum or volume.

GlobeSt.com: Are there any significant trends you see emerging as we approach Q3?

Ward: Throughout our 32-year history, we've seen significant economic events dramatically affect our industry. In the 1980s, long-term rates in the 15% to 16% range and short-term rates in the 21% range brought lending activity to a virtual halt for two years. In the 1990s, aerospace and the dot-com corrections caused values to plummet by 20% to 40%. More recently, in the 2008 financial crisis, the CMBS market collapsed and the portfolio lenders reallocated their energy and personnel to monitor and improve their existing portfolios.

We don't see indications that a reasonable increase in rates will dramatically affect the mortgage-lending industry. Since April of this year, we have seen interest rates increase by approximately 50 basis points. In February, the 10-year treasury was at 1.77%. Today, it is at 2.4%. Adding a spread of 1.6% to 2.2% gives borrowers a rate in the 4% to 4.6% range. That historically is still attractive.

GlobeSt.com: In Q1 and Q2 this year, private 1031-exchange investors drove volume. What do you anticipate will drive volume this quarter?

Ward: Refinancing, as well as sales activity, will drive volume in Q3. Refinance activity is a direct result of maturing loans that were originated at the height of the market in 2005 to 2007. At the time these loans were originated, the 10-year treasury was in the mid-4% range. Rates ranged from the low-5%s to high 5%s. Today, the 10-year treasury remains in the mid-2% range. This indicates that, even if interest rates were to continue to increase, borrowers would still achieve a lower interest rate now than what they are retiring. From the sales-activity perspective, if interest rates increase much more than 50 basis points, we may see a slight dip in volume as buyers' and sellers' expectations adjust.

GlobeSt.com: How will the significant influx of capital in the market today impact real estate financing as we move into this next cycle?

Ward: The unprecedented allocations by portfolio lenders and the healthy CMBS market all indicate a positive financial landscape in Q3. Portfolio lenders, as well as life-insurance companies, will continue to be a viable source of capital in the market throughout the third quarter and into 2016. The stabilized CMBS market will also serve as an attractive source of capital, with the number of CMBS lenders up from seven in 2010 to 31 today.

As I mentioned earlier, we are currently in the middle of a loan-maturities boom, and refinance activity is healthy. The lending community is adequately prepared to handle this increase in activity. With the current 10-year treasury in the 2.4% range and values for the most part improved, the market will be able to absorb the existing loans set to mature over the next two years, as well as the increased demand for real estate acquisitions.