We have passed the halfway mark of 2009, and it is time to take a quarterly look at rates. And there is not a lot of excitement or movement in the indices, which is good news for borrowers.
Short-term rates have been flat for some time now. Prime is still at 3.25% where it began the year. One month LIBOR is 0.3%, down somewhat from 0.47% just 90 days ago. The Mortgage Bankers Association predicts flat rates through the end of the year.
The benchmark 10-year Treasury rate continues to hover between 3.50% and 3.75%. We have a normal shape to the yield curve (economists and bankers love this stuff), giving some traction to an improving economy. The Mortgage Bankers Association predicts an increase in the 10-year rate to 4.2% by year’s end.
The good news/bad news scenario is that while the interest rate indices are flat with some predicted upward trends on the long side by year end, the bad news is that lender spreads over these indices are widening or going up. Borrowers who have loans maturing should expect an increase in spreads.
The wild card in all of this is the national unemployment rate. While things are strong here in South Louisiana, the national job market is brutal with unemployment at 9.5% and some predictions for going higher. How the Obama administration deals with this unemployment will have an impact on interest rate indices and the spreads that lenders charge.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)
