Monday, October 11, 2010
Senior Housing/Healthcare Borrowers to Intensify Efforts to Take Advantage of Low Interest Rates, Funding Expert Predicts
CHICAGO, IL--Although frustrated by the credit squeeze that continues to curtail lending activity, senior housing/healthcare borrowers are expected to intensify efforts to take advantage of interest rates as low as they’ve been in decades, one senior housing/healthcare finance expert is predicting.
“Funds for new construction projects are limited and acquisition activity has slowed dramatically. But many borrowers should be motivated to refinance existing loans with rates at current levels,” Cambridge Realty Capital Companies Chairman Jeffrey A. Davis (top right photo) believes.
Cambridge is one of the nation’s leading senior housing/healthcare lenders, with more than $3 billion in closed transactions. The company consistently ranks among the top FHA-approved HUD 232 healthcare lenders.
Davis makes the point that bond prices and the economy behave a lot like entangled particles in quantum physics. When the economy weakens and loses forward momentum, bond yields sympathetically move lower, which instantaneously causes bond prices to “spin” higher in the opposite direction.
Lower bond yields also equate to lower borrowing rates. Last spring, as the economy slowed amid fears of a pending double-dip recession, interest rates retreated and had some analysts predicting that 10-year Treasury bills could challenge levels not seen since the Eisenhower years.
“And then we got to mid-September and some mildly encouraging reports on the economy, for a change. We learned of a drop in first-time unemployment claims during the month of August and also about a slight rise in wholesale prices that is helping to quash deflation fears.
“After sinking to 2.59 percent earlier in the month, on the strength of these reports, 10-year Treasury notes rebounded to yield 2.76 percent later in September. The optimistic assessment is that the economy may be emerging from a soft patch,” Davis said.
Whatever the outcome, senior housing/healthcare borrowers can look forward to relatively attractive interest rates for the foreseeable future, he suggests.
He points out that the 10-year Treasury note serves as a bench mark for a number of things, including the popular FHA-insured HUD Lean loans that have been the only consistent source of funding for long-term care healthcare borrowers since the economy tanked in 2008.
“If a borrower is able to profitably refinance, this is a better time than most, with interest rates flirting with what may well be the low point for this cycle,” he added.
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