At the end of September, the Federal Reserve increased interest rates again this year. It was no surprise; interest rate increases have become an expectation, and will likely continue through early 2020 with an additional increase expected to come at the December meeting. While rates have increased slowly, they are now at 2.18% as of the September meeting; however, the higher rates have yet to impact investor allocations or availability of capital.

“There has been a steady increase in interest rates the last several months,” Patrick Ward, founder and president of MetroGroup Realty Finance, tells “The increase has not been dramatic enough to affect the allocation or availability of capital for real estate. However, it has affected the returns investors are seeking in real estate investments. We have not seen an adjustment of pricing sellers are expecting but if rates continue to increase interest rates will affect pricing. The current ten-year Treasury bill is around 3.10%. Recently, it hovered in the 2.20% range. Therefore, interest rates are up approximately 90 basis points.”

One reason that there has been minimal impact thus far is because, while rates are increasing, they are still at historical lows. According to Ward, most lenders are priced in the range of 1.80% to 2.20% over treasury bills, putting coupon rates for ten-year term mortgages between 4.90% and 5.30%. “This is a range that is still attractive enough that it will not alter the velocity of transactions, or from the capital side, lender allocations,” he adds. “In addition, the majority of maturing loans today typically fall within this range.”

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

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