One of the challenges of writing an article on interest rates is how to keep it interesting when nothing is really going on. Even if there were a lot going on in rates, I still wonder how interesting it truly is. But it is the top issue that I am asked about, so here goes.
With regard to short-term rates, the Prime Rate is currently 3.25%. It was 3.25% a month ago. And a quarter ago. And six months ago. One year ago it was 4%, but I’m not much excited about the goings on of a year ago.
As to long-term rates, the benchmark 10-year Treasury rate is currently about 3.35%, where it has languished for some time.
So between a review of interest rates, watching paint dry and listening to grass grow, tell me: Which is your favorite?
I suppose that only a finance geek such as myself and a few of my close friends (you know who you are) would get really excited by a review of historical rates, but the universe of interested souls grows somewhat when you bring up projections of future interest rates.
As of the November report, my trade group, the Mortgage Bankers Association, predicts that short-term rates will stay where they are for the remainder of this year and throughout next year. The Federal Reserve’s current monetary policy stance is to keep rates low for the foreseeable future. So those of you with floating rate debt can look forward to no changes based on the rate indices, but watch for increases in your interest rate if there is a renewal, as the lender is highly likely to increase the spread, which will increase your all-in rate.
Again, as to long-term rates, the MBA predicts not much change for the rest of this year, and then maybe increases of 10 basis per quarter throughout 2010. But remember that, as we have seen, market forces control the long-term rates and there is a lot of pent-up pressure to cause rates to rise above these historical lows.
Bottom line, if you like your rates right now and there are no resets coming up, don’t expect much change through the end of next year. That is, of course, unless in some sort of miracle the economy in general and real estate market in particular rebounds sooner than expected, in which case rates will rise sooner than later. I’ll leave it up to you to guess whether or not that happens.
(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.)
