The apartment loan rate we track popped up into the 4.70s today after spending the last three weeks in the 4.60s. Today’s 4.71% rate is about the same as it was a year ago, just before the taper tantrum hit. Monday quotes on the 10 year Treasury have climbed two weeks in a row now but remain below most recent highs of March, clocking in at 2.62 today. The downward march of the spread has flattened recently in the 2.0 – 2.15 range, including today’s number at 2.14. The ULI <60%LTV rate still looks like someone bouncing a ball down the stairs but their data is lagged a week so we’ll have to check back on Friday to see if that rate is going to tick up as well.
The apartment building investment loan rate we track continued to trend downward as both the 10yr Treasury (T10) and the spread between the two came in during April. Today’s new rate on the loan is 4.733%, a 212 basis point spread over the T10 which was in the 2.61% area today. The six month moving average spread continues to fall suggesting that lenders are more confident and/or aggressive but the spread itself is above the March 17 low of 209bp.
This month we add a new rate which the ULI (Urban Land Institute) reports on from the Trepp survey. According to the ULI the Trepp rate is what large institutional borrowers could expect to pay on a 10 year fixed rate, less than 60% LTV loan for a “crème de la crème” core apartment property located in a gateway market. We track this rate as a barometer of what the largest lenders are offering their best customers on the most secure loans for any advanced warning about future rate and spread changes. See the ULI<60LTV Rate on the chart below (in gold). Note that the spread we chart is between 10yr loan we track (in orange) and the T10 (in blue):
The apartment investment loan we tract (see below for details) clocked in at 4.861% this week making it the 10th week in a row below 5%. Meanwhile the spread between it and the benchmark 10 year Treasury (T10) held in the 210 -220 basis point range over the last six weeks. The T10 itself had been in the 2.7% range over the last month but dipped to 2.65% this week:
After spending just one week above its six month moving average the spread between the apartment investment loan rate we track and the 10 year Treasury (T10) fell to 2.143 with the apartment loan rate at a nine month low of 4.743%. Meanwhile the T10 bounced up to 2.8%, climbing 20bp in the past week:
In more good news for apartment building investors, both the 10 year Treasury and apartment loan rates have moderated since the Fed’s “non-taper” announcement in mid-September. The spread between the T10 and the 10 year apartment loan rate we track has come in as well. Since 9/16 the Treasury has drifted down from 2.88% to yesterday’s quote of 2.53% while the loan rate has moved from 5.282 down to 4.921, bringing the spread in to 2.381 from 2.402. The average spread for 2013 has also narrowed to 2.573%:
10 year apartment building loan rates had been in a range the last few weeks until Ben Bernanke ‘failed to taper’ last Wednesday causing the bellwether 10 Year Treasury to fall about a dozen basis points to today’s quote of 2.72%. This is good news for apartment building investors, home buyers and builders, stock market speculators, just about everyone except savers, retirees and the people running retirement plans. The upside is that loan rates may head lower but the downside is the economy and particularly employment haven’t improved enough to ease off the money printing pedal.
Here’s the latest chart showing the T10, the 10 year fixed apartment rate we track and the spread between the two:
This week’s quote for a 10 year fixed rate, 30 year amortization apartment loan is 5.131%. (See below for more detail on this loan). The other thing noticeable on the chart is that the spread between the rates has been below the yearly average consistently since the beginning of July. In fact the average spread has fallen to 2.602 from 2.661 over that period. Partly because 4.5% was about as low apartment rates were going to go no matter how far down Treasuries went but also I think that lenders are getting more aggressive, especially in the multifamily sector.
After two weeks of holding at 5.068% the apartment loan rate we track rose to 5.274%, pushed higher by the 10yr Treasury moving up 31 basis points in the last week and a half. The spread between the two remained below the 2013 average of 2.628, coming in at 2.394:
The rate on the 10yr fixed (30yr amortization) apartment building loan we track stayed in the 5.0-5.1% range for the second week while the spread to the 10yr Treasury remained in the 240 area, still lower than the 2013 average of 264:
Quick update: The 10 year Treasury (T10) climbed back up into the 2.60% range while the 10 year fixed apartment building loan we track moved up to 5.033%. The spread between them widened to 242bp but remains below the 2013 average of 265bp. This week we’ve added the darker green line to show the average spread between the T10 and the apartment rate on the chart. Note that it uses the Right Hand Scale along with the spread itself:
Back on June 24th I wrote a post Analysis on Tapering QE3 talking about how traders fears about the end of the Fed’s money printing spree made the interest rate on the 10 year Treasury jump. And as I mentioned in a follow up post Update on the 10yr Treasury rate we care about the 10yr Treasury (or T10) because it’s the benchmark most lenders base long term loan rates on. But there is one more component of apartment loan rates (and lending rates in general) that I want to draw your attention to. First an updated chart:
I’ve updated the chart with the latest rates and also added the rate for an apartment loan with a fixed rate for 10 years from one of our lenders (details on the loan terms below). The other thing I added was the spread, or difference, between the two rates (on the Right Hand Scale). So far in 2013 the spread has averaged 2.65% or 265 basis points (bp) but it’s not a fixed amount that the lender adds to the T10. You can see that back in the beginning of May when the Treasury rate got as low as 1.66% the spread widened to 280bp because the loan rate was left at 4.5%. Then the spread narrowed back towards the average even while interest rates went up from there.
Then the Fed meeting notes came out in the middle of June and the T10 shot up but we got a double dose because the spread jumped up too. The Treasury went from 2.19% on the 17th to 2.57% on the 24th, and the spread jumped from 262pb to 283. It makes sense that in the uncertainty of a sudden rise in rates that lenders would widen their spreads to create a little breathing room but since then things have gotten quite interesting… in a good way. The good news is that since then the spread has Continue reading Apartment Building Loan Rates Fall as Spreads Narrow