Invest Wisely

Vancouver Commercial Mortgage Market - Shortage Of Funds

Vancouver Commercial Mortgage Broker: “There’s 25%-30% less funds available in the market than 6 mos - 1 year ago. Loans which were previously A class loans are being pushed downward to B and C class treatment.”

My comment: Canadian Banks have stopped lending to each other as a direct result of the US credit crisis. Obtaining financing to acquire non-residential property is suddenly more difficult and more expensive as the swapping of funds between lenders has now come to a standstill. Typically most fixed commercial mortgages are priced relative to the 5 year bond (the competing vehicle for the same investment $). Class A borrowers were previously able to achieve 5 year bond +150 bps (1.5%) but are now facing 225 bps and greater. Class B and C product and borrowers are looking at 300 bps and greater. As spreads increase and underwriting continues on a stringent path there will be a slowdown in new project starts counteracting any liquidity and growth measures initiated by the Bank of Canada.