SOURCE: South Florida Business Journal
Many speculate with the slowing of the housing market that the competition for commercial loans will increase among banks and commercial lenders. This comes as good news to business owners, developers, builders, construction companies and entrepreneurs as increased competition should result in lower interest rates.
As condo and home building has declined many see the increase in competition and lower rates as a way to increase and expand developing in the commercial market sector and help offset the housing decline. Banks have typically viewed commercial loans as more risky and less safe than real estate loans but many more are trying to compete in the commercial loan sector now. Many of the commercial construction loans have rates based in the 30-day London Interbank Offered Rate (LIBOR) and are around 2.5% above it. Currently the LIBOR is around 5.3%. Rates on commercial loans to purchase commercial real estate are seen different and often based on 30-day U.S. Treasury note rates that are currently around 4.5% with a 2.5% increase. Speculation is that soon these types of loans for commercial construction and commercial real estate purchasing will be offered at spreads smaller than the current 2.5%.
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