Economists have been working overtime on their predictions for short-term rates in 2011, and the results are just coming in: not much change for short-term rates in 2011. Short-term rates remain at historically low levels, and there is no governmental impetus to increase them anytime soon. This is obviously good news for those of us with floating rate debt, though we can expect our banks to increase spreads over floating rate indexes and impose interest rate floors; but at least there will be some certainty in debt service for the coming few quarters. Those of us who are on floating rate construction loans, waiting to convert to permanent or mini-perm debt, might not have to worry about meeting debt coverage tests, at least not from the debt service side.
The not-so-good news is the reason behind the flat rates: continued weakness in the national/global economy and failure on the part of governmental programs to provide a jumpstart for any noticeable recovery. Yet, aside from the national and global outlook, our local economies are still relatively strong, with hope for recovery in the new year. So let’s enjoy the low rates for another year and be happy that we live where we do.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Real Estate Services and he can be reached at brian.andrews@acmla.com.)
