That doesn’t mean that there is no impact of the recent rate increases on the commercial sector. Mor said he thinks what higher rates tend to do is serve as a filter for the best deals. The ones that make the most sense pass through the filter and get done, while the weaker deals require a little more effort to get closed.
“Higher rates affect commercial a bit, but not in a dramatic way,” he said. “CRE doesn’t react to changes overnight the same way residential does. What you’re seeing is more of a filtering effect. The strong deals are still getting done, and the weaker ones are getting pushed out or reworked.”
However, refinances are impacted by rate increases across the mortgage spectrum. In the commercial space, it becomes complicated because the deals are usually very large.
“Refinancing is probably where you feel it the most,” Mor said. “There’s a lot of debt up for repayment, and higher rates make some of those deals tougher to make sense of. But overall, the market is still moving. It’s just more selective again.”
Xander Snyder, senior commercial real estate economist for First American, told Mortgage Professional America the impact of higher rates might not be completely clear just yet across the commercial sector.
