Refinance opportunities stemming from rising vintage loan maturities allowed for a rebound in CBRE’s Q2 lending volumes, according to a new report from the firm.
The dollar volume of loans closed by CBRE was up 2.1 percent from the previous quarter and 5.7 percent year-over-year.
CBRE’s loan count data indicates that refinance deals accounted for a higher than average percentage of permanent loan deals in Q2 — 58 percent for refinance versus 42 percent for acquisition — though in previous quarters this has typically been split evenly, CBRE analysts told Real Estate Capital.
“The demand for loan refinancing remained strong, with an increasing level of loans maturing despite a subdued acquisition market,” analysts said in the report.
Banks pulled most of the weight, tracking significant gains with 49 percent of total volume compared to just 31 percent in Q1 (See chart). Life companies were next in line with 20 percent of volume, followed by the CMBS market with just 10 percent. The remaining major investors, including REITs, non-bank lenders, pensions and finance companies accounted for the remaining 20 percent.
CBRE also noted that borrowers continue to secure historically low mortgage rates, with 40 percent of loans carrying a coupon of 4 percent or less, compared with 28 percent during Q1. When it came to loans larger than $10 million, the proportion (of loans with a coupon of 4 percent or less) shot up to 59 percent.
At the same time underwriting became remained conservative, with loan-to-values (LTVs) averaging 66.3 percent, just about where they stood one year ago, while the percentage of partial or full interest only loans has remained below 60 percent since Q4 2015.
“The increase in commercial real estate lending volume was a promising sign, especially in light of the heightened uncertainty at the beginning of the year,” analysts wrote.