Interest Rates
- The 10-year Treasury yield has been volatile. After briefly touching 5% on October 19, 2023, the 10-year Treasury has been on a gradual decline ever since, reaching 3.91 at the time of this writing on December 14, 2023
- There has been some discussion about what might happen if the 10-year Treasury yield falls below 4%.
- We have seen an increase in refinance activity as a result of the lower treasury yields.
- Interest rate sentiment now seems to fall into three camps.
- Camp 1: The Fed will begin reducing rates in the first quarter of 2024.
- Camp 2: The Fed will reduce rates twice before the November 2024 election.
- Camp 3: “Higher for longer”—the Fed will not reduce rates in 2024.
- We do not forecast rates. We believe that people who predict rates are guessing.
- If we were asked to give our best “guestimate,” we would predict two Fed rate cuts and a 10-year Treasury yield of 3.75% by the summer of 2024.
- The best hedge for borrowers is to prepare in advance so they can take advantage of market dips in rates.
- We advise borrowers to begin the refinance process at least nine months prior to their loan maturity.
Single Tenant Triple Net
- Inventories are building on all major credits, including:
- Starbucks
- Chipotle
- 7-Eleven
- Dollar General
- Developers are slowing down due to less debt available and growing inventories for sale.
- 1031 buyers are few and far between.
- We estimate that cap rates will increase more in the next four months than they did in the previous twelve months combined.
- A car wash operator client recently purchased two car washes pre-COO at the developer’s cost.
- BTS Construction loans are available for up to 85% LTC, with SOFR rates of 450-500. Major credits are considered.
- Mini Perm loans are available for up to 75% LTC, with rates of 250-350+ over 5-year treasury. Terms are 3-5 years, with amortization periods of 25 years. Major credit tenants are required.
Life Companies
- Life insurers are taking advantage of the turmoil in the capital markets.
- They are adding higher-quality assets and borrowers to their portfolios.
- The majority of life insurance companies that BMC represents are projecting increased volumes of 5-10% for 2024.
- Current life insurance interest rates are 6.5%-7.5% fixed.
Bridge Lending
- We have identified several new bridge lender entrants.
- Program 1=Loans $10M and up, LTC up to 80%. Rates SOFR+300.
- Program 2=Stretch senior, LTC-Up to 90%/75% LTV Stabilized Value, Rates.
Year End
If you’re looking for a loan that needs to be closed by year end, we’ve got good news for you! Our lending partners are here to assist you and can help you get your loan approved this week. However, it’s important to note that the rates start at 10%, which may seem high to some borrowers. We recommend that you explore other options as well before making a decision, so that you can choose the one that’s best for your financial needs.
