Multifamily Interest Rates Stay Low Amid Financial Turmoil

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By Keat FoongExecutive EditorChicago—Interest rates remain relatively low for multifamily permanent loans at the moment despite the turmoil in the financial world. Sue Blumberg, senior vice president and managing director in the Chicago office of NorthMarq Capital, says that spreads for Fannie Mae financing have for the most part held steady. For Freddie Mac financing, […]

By Keat FoongExecutive EditorChicago—Interest rates remain relatively low for multifamily permanent loans at the moment despite the turmoil in the financial world. Sue Blumberg, senior vice president and managing director in the Chicago office of NorthMarq Capital, says that spreads for Fannie Mae financing have for the most part held steady. For Freddie Mac financing, spreads have fluctuated more, but they have done so “within a narrow range,” she said. Where spreads have widened, they have been countered by lower Treasury rates with the result that interest rates are still in the low-6-percent range for 10-year Fixed Rate Mortgages (FRMs). Blumberg said this week that interest rates for 10-year FRMs is 6.25 percent. Five-year FRMs are bringing about 5.52 percent (with yield maintenance) and seven-year FRMs are carrying about 5.77 percent. On the ARM side, the benchmark LIBOR rates have spiked. However, the Freddie Mac reference bill benchmark is trading below LIBOR. The 30-day Freddie Mac reference bill benchmark is 2.11 percent compared to 2.75 percent for the 30-day LIBOR. “Usually there is only a 20 basis point difference [between LIBOR and Freddie Mac reference bill rates]. There is unease in the [LIBOR] market,” said Blumberg.  In fact, seven-year capped ARMs are currently particularly popular. Blumberg said Freddie Mac capped ARMs are carrying interest rates of 4.50 percent, with a cap of 6.5 to 6.75 percent (assuming up to 70 percent LTV). Fannie Mae capped ARMs are tied to LIBOR but still bringing interest rates of 5.46 percent for the five-year ARM (for LTVs of 70 percent or less), she noted.

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