Rates are up – Now what?

Rates are up – Now what?

by Rob Seidenwurm

In case you missed it (you probably didn’t) the Fed raised rates for the 2nd time in the last decade (!) Wednesday.  We’ve previously discussed how interest rate hikes might affect CMBS loans, but now that the reality is upon us, it is time to revisit.

Assuming rates continue to climb as forecasted, it would stand to reason that commercial mortgage interest rates will climb as well.  If that happens, less loans that are looking to refinance will qualify, as the Debt Service will be higher than in the past, skewing some ratios on borderline loans.

Unfortunately, that should equate to higher default rates, as more loans will not pay off by maturity.  If you are CMBS Borrower facing maturity, it makes sense to revisit the plan for either refinance or sale.  Penalties for missing maturity dates on CMBS loans can be severe.  1st Service Solutions can help you evaluate your current strategy.