The total cost of senior debt was higher on average across the whole of Europe in the third quarter of this year, up by 11 basis points to 2.28 percent, according to CBRE’s latest European Debt Map.
The trend for rising costs over the quarter was driven largely by an increase in five-year swap rates – used as a proxy for the interest rate component – in each of the 20 European countries analysed by the global real estate advisor in its quarterly research.
A few countries, however, bucked the trend, offsetting rising swap rates either partially or entirely with falling margins. Italy and Sweden saw senior margins fall by 10bps, while loan-to-value ratios were static, meaning the rise in the total cost of senior debt was minimal at just 3bps.
Only three countries saw the total cost of debt decline:
In Ireland, senior margins fell from 1.50 percent to 1.25 percent, more than offsetting a 13bps rise in the five-year Euribor swap rate, so that the total cost of debt fell to 2.04 percent.
In Spain, borrowers of senior debt saw a double boost from both rising LTVs (from 60 percent to 65 percent) and falling margins, from 1.80 percent to 1.25 percent. The total cost of debt declined from 2.26 percent to 1.72 percent
In the UK, changes were more nuanced and on balance probably saw little decisive shift in favour of either borrower or lender; while senior margins declined from 1.50 percent to 1.25 percent, LTVs also fell – from 60 percent to 55 percent. Overall, the total cost of debt went down from 2.92 percent to 2.79 percent.