Unless you’ve been hiding under a rock for most of 2022, you know that interest rates are on the rise. The best barometers for commercial real estate interest rates are US Treasuries and LIBOR/SOFR. They are the indices most lenders use to price their loans. Since December 2021, the 10-Year benchmark index has risen over 150 basis points to 2.96% as of May 17, 2022. To be sure, this more than doubling of treasury rates over five months has led to disruption in the market and caused lenders to revisit their spreads, as well. It is getting more expensive to borrow money, period.
As there is no way to turn back the clock, we do not anticipate a return to last year’s interest rates anytime soon. But the news is not all doom and gloom. Just because the Fed has started to adjust rates upward does not mean that we are no longer in a favorable rate environment. We encourage prospective borrowers to remember that interest rates are still historically low and appear to be headed higher for the foreseeable future, so taking action sooner rather than later is advised. While borrowers may not be in a position to secure rates as low as they have been in the last few years, they should still be able to lock in debt at attractive rates compared to historical norms.