As has been the case for much of the recent crisis, borrowers are continuing to try to capitalize on favorable rates to refinance apartment properties—that is, when they can find lenders willing to close deals.
Long term interest rates—like the yield on 10-year Treasury bonds—fell below 1 percent at start of the economic crisis caused by the spread of the coronavirus in March 2020, and stayed below 1 percent well into mid-summer.
Freddie Mac and Fannie Mae lenders have proven to be consistently willing to make loans to qualified apartment properties with interest rates fixed at a spread over these historically low interest rates. Other types of lenders, including many banks and life insurance companies, have been more cautious.
On July 28, the benchmark yield on 10-year U.S. Treasury bonds was 0.58 percent. It has hovered around 0.6 percent and 0.7 percent for several months. In comparison, in the months before the crisis, the benchmark yield hovered between 1.5 percent and 2 percent.
“The outlook is for a continuation of low rates through the end of the year,” says Tony Solomon, senior vice president and national director of Marcus & Millichap Capital Corp. “Could rates fall even lower? Sure, maybe a little, but they are very low now and we know that there is an ‘open window’ of various capital sources for the right asset and borrower.”