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» Beware the Rising Cost of Money

Posted on 11/18/2005

The cost of money is rising and the rush is on. Just as the holiday season heats up with an increase in retail sales, commercial loan requests are increasing at a rapid pace. After so many months of quiet, to what do we owe this phenomenon?

There are several indicators that are encouraging people to move on loans where before they dawdled:

  1. After 18 years at the helm, Mr. Greenspan will be moving on. The new Master is an unknown quantity. Anything from a drop in rates to a rapid increase is possible. Many business owners, developers, and investors cannot take the risk of a sharp increase in the cost of money. They need to fund and lock in rates now.
  2. Rates have already been rising. Only a few months ago, the Prime Rate hovered around the 4% region. With the Prime at 6%, borrowers are seeing the handwriting on the wall.

As the economy continues to thrive, the trend in the rise of the cost of money is not likely to reverse any time soon. Expect the increase in requests for commercial and investment loans to increase and the concurrently the cost of money to increase to meet the demand.

 

Posted in Commercial Real Estate News