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Where The Heck Are Interest Rates?

Where The Heck Are Interest Rates

Fed Funds Rate (See chart): Currently 5.50% Interest rate which is set by Federal Reserve which banks can borrow/lend money from/to each other. After a series of increases in 2021 and 2022 this rate has remained unchanged since the last 0.25% (25 basis points) increase in July 2023.

10 Year Treasury Rate: Currently 4.65%. Interest rate on 10-year federal treasury notes. This benchmark is typically used by Institutional & Life Companies to set interest rates on longer term investment grade real estate.

Prime Rate: Currently 8.5%. Interest rate set by Wall Street Journal as the current average prime lending rate of Banking institutions lending money to the public. (Very typically a 3-point spread above Federal Funds rate – ‘cause the bank’s got to make some money too ?)

Hilliker-Blog-Where The Heck Are Interest Rates

So, what does that mean if I want to buy real estate today?

Business Owner buying a building for their own use: From your local bank you will pay 8% to 8.25% (slightly below Prime). They will typically want 20% down payment and will not fix rate longer than 5 years with a 10 to 20 year term amortization. They will require a personal guarantee (or additional collateral)

Investor buying commercial investment property: From Institutional & Life Company lenders you will pay 7% to 7.25% (typically around 2.5% over the 10-year Treasury Rate). They will likely require 40% downpayment but will fix rate for 10 years and allow for limited recourse.

Currently Inverted Yield Curve = Long Term money cheaper than short term = financial institutions believe rates will go down.

BTY: If you buy a home today in St. Louis you will pay around 7.38% for a 30-year conventional mortgage (sorry Hilliker corporation does not sell homes)

*Rates are certainly up from 3 years ago yet, fear not. Call your favorite Hilliker Agent to discuss creative ways around or to defer todays higher rates *

About Hilliker Corporation:

The Entrepreneur’s choice for commercial real estate services in the St. Louis region. Hilliker guides business owners through their needs at each stage of the business life cycle. Since 1985, Hilliker Corporation has brokered more than 10,000 transactions including sales and leases of industrial, office, institutional, retail and investment properties. To learn more, please call, (314) 781-0001.

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