Get a fix on floating-rate risk

Commercial Property

One of the major manifestations of the current market crisis is the increased volatility in short-term interest rates, such as three-month Libor. This development has reminded commercial real estate lenders of the risk posed by floating-rate loans.

Over the past decade, there have been four principal forces pushing lenders away from fixed-rate loans: forgetfulness, borrowers, treasuries and mislaid risk. The forgetfulness is simply that interest rates have been stable for as long as many borrower

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