Commercial Mortgage Lending Continues to Slow

Executive Summary

• The CBRE Lending Momentum Index fell by 5.4% quarter-over-quarter and 52.2% year-over-year in Q2 as lending conditions remained challenging.
• Spreads on seven- to 10-year, 55%-to-65%-loan-to-value (LTV) fixed-rate permanent commercial loans widened by 21 basis points (bps) to 227, while multifamily spreads widened by 6 bps to 176.
• Banks remained the top non-agency lending group, accounting for 43.4% of Q2 loan volume that was mostly for construction and refinance deals. Life companies actively financed permanent loans for multifamily and industrial properties, while securitized lending remained constrained.
• Multifamily agency lending totaled $27.8 billion in Q2, down from $33.4 billion a year ago. Mortgage rates on closed fixed-rate seven-to–10-year agency loans rose 9 bps quarter-over-quarter and 154 bps year-over-year.
• The percentage of partial- or full-term interest-only loans reached a record-high 82.1% in Q2. Other key underwriting measures changed little between Q1 and Q2. However, underwriting was tighter than a year ago.