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Consider Fixed-Rate Commercial Mortgages as Rates Continue to Climb

The Federal Reserve raised the federal funds rate for the third time this year at its September 26 meeting, according to CNN. The move indicates continued confidence in the U.S. economy as unemployment remains low, economic growth is strong and inflation remains stable.

“Our economy is strong,” Fed Chairman Jerome Powell said at a press conference on Wednesday. “These rates remain low, and my colleagues and I believe that this gradual returning to normal is helping to sustain this strong economy.”

Central bankers have also indicated that they will likely raise the federal funds rate again in December, as well as at least three hikes in 2019. Given this information, brokers should consider seeking out longer-term, fixed-rate commercial mortgages for their borrowers going forward. The benefits of these types of commercial mortgages are clear.

First, there’s less pressure on your borrower to pay off the mortgage quickly.

Unlike ballooning bank loans or short-term hard money loans, a long-term, fixed-rate commercial mortgages give your borrower a sense of financial security and more time to plan out their financial future.

And second, they can expect a consistent monthly payment. At the moment, rates are low, so adjustable-rate mortgages will appeal to your borrowers.  However, in a rising rate environment, ARMs can become a problem for some borrowers, since the rate could increase substantially over the life of the loan. With a fixed-rate mortgage, your borrower won’t experience the unpleasant surprise of increasingly expensive monthly payments.

Brokers who choose to seek out fixed-rate, fully amortizing mortgages for their borrowers are doing their borrowers and themselves a big favor. By getting your borrower a deal like this, you’re helping them to achieve their business goals while giving them a sense of financial security and building trust and credibility as a commercial mortgage broker.

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