Commercial Finance Interest Rate Update | June 2021
Recent economic statistics have shown increased signs of inflation. Prices for goods like lumber and used cars have pushed up measures of inflation to multi-year highs. Recently the consumer price index showed an annualized increase of 5% in May. This is the fastest inflation increase since 2008.
The Fed has generally taken the position that these signs of inflation are temporary in nature and will ease over time. Nonetheless, there has been a sense of concern from many who follow these trends. According to a 6/23/21 article in Reuters by Howard Schneider, “Fed Chair Jerome Powell and other policymakers have staked their current outlook on a presumption that the surge in prices seen as the economy reopened would ease on its own, allowing the Fed to hit its 2% inflation target on average over time.”
The benchmark 10-year treasury closed today at 1.49%, still very low from a historical standpoint. Additionally, spreads (the profit margins over the benchmark index that lenders use to price deals) are still at all-time lows. Spreads have remained low as the liquidity in the market has continued to be strong.
The current market for typically fixed-rate loans looks like the following:
- 3-year fixed-rate loans from 2.25-3.50%
- 5-year fixed-rate loans from 2.50-3.75%
- 10-year fixed-rate loans from 2.50-4.00%