Multifamily Borrowers Look to GSEs for Much-Needed Stability

The long-expected end to an unprecedented 14-year run of low interest rates materialized in 2022 as the Fed initiated an aggressive campaign of hikes to battle inflation in April. The Federal Reserve raised the target range for the federal funds rate by 50 basis points to 4.25 percent to 4.5 percent during its December 2022 meeting, marking a seventh consecutive rate hike pushing borrowing costs to a new high since 2008. After four consecutive 75 bps increases, the latest move by the Feds indicates a belief that previous increases have been successful in slowing inflation as intended; however, interest rate increases are expected to continue, albeit at a slower pace, through at least mid-2023.

With the outlook for this year still very much in flux, agency lending will become an even more important source of capital for multi-family property owners than ever as the liquidity and stability of the agencies are strengths in markets under duress. Fannie Mae, Freddie Mac and the Federal Housing Administration provide stable liquidity, and unlike other capital sources, are required by federal mandate to be in the market at all times.