Lending Demand Will Hit Record Highs Next Year
As interest rates continue to move down, lending demand is expected to soar to take advantage of the opportunity.
Lending demand is expected to soar amid reduced interest rates. Interest rates began to fall back to historical lows earlier this year, and the Fed is expected to decrease rates again at least one more time this year. The result will likely fuel investment and lending activity for commercial real estate, and could convince sellers to bring opportunities to market.
“Lending demand will continue to hit record highs as interest rates move to record lows,” Quotes attributed to James McDonald, CEO & CIO Hercules Investments. “It’s a statistically inverse correlation that mathematically won’t ever change. Borrowers and lenders are confident that the fed won’t raise rates in an election year so I do not see the possibility of an abatement of demand leading up to November 3, 2020. Unfortunately though, not all borrowers benefit equally from the opportunity for record low mortgage rates.”
While the low interest rate environment certainly means more opportunity, it may not all be equal. According to McDonald, minority borrowers are often not given the same low rates, even when they have the same credit worthiness. “African American, Latino, and other minority borrowers with credit scores equivalent to non-minorities continue to pay unfair, higher interest rates,” says McDonald. “There’s still a lot of work that needs to be done toward eliminating discriminatory lending practices and I hope the increased discussions surrounding the favorable rate environment we’re in will shed more light on this problem so that effective solutions can be found.”
Aside from commercial real estate lending, McDonald says that the low interest rates will have little impact on other forms of investment, like the stock market. The trend would have to come with other economic benefits. “If we’re talking about the stock market, low interest rates alone will not impact investment activity,” says McDonald. “If lowered interest rates are combined with solid quarterly earnings, geo-political stability abroad, and the absence of a major scandal, natural disaster, or catastrophic terrorist attack, then we should see a continuation of the previous decade’s average annual stock market returns of 11% with a potential and temporary 10-15% correction leading up to the Presidential Election.”