Interest rates

Lower-for-longer conditions are driving capital into property markets. But persistently low interest rates are also a concern for real estate investors and lenders.

Historic low rates are a boon for capital seekers, but institutional investors face newfound uncertainty as lower for longer threatens to become lower forever.

Debt market sources say some banks are agreeing to drop interest rate floors as they compete for core, senior financing deals in liquid markets.

The impact of the ECB’s monetary policy reversal, growing caution in the banking sector, and the importance of lending selectively were among the concerns at this year’s EXPO Real.

Debt providers will see rising interest rates, slower growth in European markets and more political uncertainty in 2019.

Building a resilient portfolio with a focus on income is what will drive outperformance in the next stage of the cycle, the Swiss bank says.

In the face of headwinds including Brexit, rate rises and high street woes, these trends show there is still a strong appetite to provide debt.

Last week’s UK interest rate hike is not an immediate cause for concern in the real estate debt market, but the gradual shift in monetary policy is a headwind.

The UK-focused firm has refinanced a £129.6m loan and extended a £20.5m revolving credit facility.

An increase in rates could lead to some lenders reducing their maximum LTV levels, says Savills' Nick Hume.