Rate Hikes Pose Threat to CMBS, Investors Face Possible Loss on Chicago Office Property, Delinquency Rates Fall to Pre-Pandemic Levels

Rate Hikes Don’t Mix Well With CMBS: The Federal Reserve’s boost of borrowing rates to help fight inflation threatens to hurt loan repayments, reduce cash flows and increase refinancing challenges for some structured finance asset classes, including commercial mortgage-backed securities, according to a report from Fitch Ratings. The credit ratings and analysis firm projected interest rate hikes would result in greater debt burdens for weaker borrowers. Higher interest rates would also make commercial real estate loan refinancing more costly relative to recent years, Fitch said. One positive, according to the firm, is that loans maturing in 2022 and 2023, the majority of which were originated 10 years ago, have interest rates 1.09% higher on average than the current market, providing some cushion.