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Commercial Mortgage Lending Stabilizes in Q4

U.S. Lending | Q4 2023

February 9, 2024 2 Minute Read

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Executive Summary

  • Lending activity as measured by the CBRE Lending Momentum Index increased by 1% in
    Q4—the first quarterly increase since Q1 2022. However, the index was down by 38.1% from a year ago.
  • Spreads on seven- to 10-year, 55%-to-65%-loan-to-value (LTV) fixed-rate permanent commercial loans widened by 15 basis points (bps) to 234, while multifamily spreads widened by 19 bps to 192. However, January loan quotes indicate that spreads have tightened from these levels.
  • Banks were the most active non-agency lender, accounting for 39.5% of Q4 loan volume. Alternative lenders accounted for 30%, up slightly from Q3.
  • Multifamily agency lending slowed to $27.1 billion in Q4 from $29.8 billion in Q3, as average fixed mortgage rates increased. The Federal Housing Finance Agency (FHFA) announced 2024 purchase volume caps of $70 billion each for Fannie Mae and Freddie Mac.
  • Average mortgage rates and loan constants increased significantly in Q4. The percentage of loans carrying partial- or full-term interest only fell to 77.8%. Average LTV ratios for commercial and multifamily loans inched higher, while the average underwritten cap rate increased by 38 bps to 6.06%.