Commercial Mortgage Lending Activity Declines

U.S. Lending | Q1 2023

May 10, 2023 2 Minute Read

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Executive Summary

  • The CBRE Lending Momentum Index fell by 33% quarter-over-quarter and 53.5% year-over-year in Q1 as stress in the banking system and financial market volatility created challenging lending conditions.
  • Spreads on seven-to 10-year, 55%-to-65%-loan-to-value (LTV) fixed-rate permanent loans widened for commercial properties but tightened slightly for multifamily assets. Commercial loan spreads widened by 14 basis points (bps) to 206, while multifamily spreads tightened by 8 bps to 170.
  • Despite some high-profile failures, banks remained the top non-agency lending group, accounting for 41.1% of Q1 loan volume split evenly between construction, acquisition and refinance loans. Life companies actively financed shorter-term, lower-leverage permanent loans.
  • Multifamily agency lending totaled $16.5 billion in Q1, down from $30.9 billion in Q1 2022. Mortgage rates on closed fixed-rate seven-to–10-year agency loans rose 11 bps quarter-over-quarter and 184 bps year-over-year.
  • Mortgage rates, loan constants and cap rates all rose in Q1. The percentage of loans carrying interest-only terms increased by 5 percentage points quarter-over-quarter to 77.6%.