Executive Summary
• Market volatility from rising inflation and interest rates cooled the commercial mortgage market in Q2, characterized by wider spreads and more selective underwriting.
• The CBRE Lending Momentum Index declined 7.9% quarter-over-quarter. However, the index was up 41.1% from a year ago.
• Spreads on commercial seven- to 10-year, 55%-to-65%-loan-to-value (LTV) fixed-rate permanent loans widened by 29 basis points (bps) quarter-over-quarter to an average of 187 bps. Multifamily spreads widened by 28 bps to average 172 bps.
• Banks replaced alternative lenders as the leading non-agency lending group in Q2. Alternative lenders’ activity was slowed by rising spreads in the collateralized loan obligation (CLO) market. CLO issuance fell to $12.3 billion in Q2 from $15.2 billion in Q1.
• Industrywide CMBS issuance stalled in June amid market volatility and rising spreads. Spreads on 10-year AAA CMBS bond issues reached swaps +152 in early July, up from swaps +130 bps in late March. .