"Result has been the first of what may be many quarters of depressed borrowing and lending activity"
After a solid first half of the year, commercial and multifamily mortgage originations plunged 13% in the third quarter as the sector started to feel the pinch from rising interest rates.
Commercial and multifamily mortgage originations were down 13% from the same period last year, according to the Mortgage Bankers Association’s (MBA’s) quarterly survey.
“Increasing yields across investment alternatives – including the 10-Year Treasury yield more than doubling during the first nine months of the year – have shifted property financing and values, and it will take time for the market to fully absorb these changes,” said Jamie Woodwell, head of commercial real estate research at MBA. “Volatility has been equally impactful, making the sizing of transactions extremely difficult. The result has been the first of what may be many quarters of depressed borrowing and lending activity.”
The report showed that the decline in overall lending volumes was led by a fall in originations for office, multifamily, and retail. By property type, office decreased by 44%, multifamily decreased by 16%, retail decreased by 6%, and industrial decreased by 4%. Meanwhile, lending backed by hotel properties jumped 24%, and health care was up by 61% in the third quarter.
Among investor types, the dollar volume of loans originated for commercial mortgage-backed securities (CMBS) plummeted by 71% annually, life insurance company portfolios fell 42%, government-sponsored enterprises (GSEs – Fannie Mae and Freddie Mac) decreased by 15%, and investor-driven lenders dipped 8%. Originations for depositories, on the other hand, grew by 25%.
“Different capital sources have felt the slowdown in different ways – with third-quarter originations in the CMBS market down almost 75% from a year earlier, while originations by banks and other depositories were 25% higher,” Woodwell said. “A broad decline in transaction activity is likely to impact all capital sources, although perhaps not equally.”