Wall Street banks will soon be faced with an increase in demand from borrowers seeking commercial property loans in the wake of the Federal Reserve’s announcement to maintain its current pace of stimulus measures, according to JPMorgan.
Interest rates have fallen since the central bank made its announcement, after a surge that started in May when Fed Chairman Ben S. Bernanke announced that policy makers were considering varying the monthly bond purchases as early as September. Instead, issuance of commercial-mortgage bonds is likely to rise.
Refinance volume and transaction volume will increase as borrowers take steps to lock in lower rates before the decision is made to taper the stimulus measures, New-York based analysts stated in a recent report.
The long period of low interest rates, could put a strain on investor interest for securities linked to related items. The bank is forecasting a total of $77 billion in sales this year, and the report states that about $56.7 billion has been offered to date.
The market for new commercial mortgage-backed securities reopened in 2010 after slamming shut when the credit markets froze with the 2008 global financial crisis.
The amount of debt being paid during the past five years outstripped the pace of new issuance. The trend is expected to reverse with sales potentially doubling from last year’s level of $42 billion, according to data compiled by Bloomberg.
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