2025 Market Insights: Building a Winning Strategy in a Dynamic Lending Environment

A new year often brings new optimism – which often means better rates for a mortgage banker. January is often the month of rate reductions and lofty allocations for our lenders. This year, that has yet to be seen. Perhaps you are stepping into 2025 with a strong sense of confidence (read: optimism) that rates will trend down to acceptable levels (low 5s?) and all will be vibrant again in CRE. Well, as I have recently taken to saying, the most compelling reason that many feel that rates will come down is that they hope that rates will come down. But hope is not a strategy, unfortunately.

The data – the market itself – seems to tell us that rates are where they ought to be, at least for now. The truth is, it all boils down to treasury yields. Spreads have been largely unchanged for over a year. Now more than ever, just watch the 10-year treasury index to know where rates are heading. Bond yields, if you’ve noticed, are methodically plodding upward, nearly in perfect contrast to the Fed’s actions. Since the initial 50 bp rate cut from the Fed in September, the 10-yr UST has RISEN 100+ bps. How should we understand this? Simply, the market doesn’t believe the Fed – or perhaps trust the Fed… either way, the outcome remains unchanged.

Here is what you need to know about these capital markets to build an actual strategy for 2025. Deals are getting done, rest assured. Appetites for Retail, Industrial, and Multifamily remain strong. Insurance – in case you are not aware – is the going concern of our day. Banks, if they are lending, want huge deposits. Environmental standards are tightening. This market requires plenty of savvy and courage, but our lenders are active and need to get money out. Above and beyond our access to capital, we are very much in the service business, delivering solutions for our clients far beyond the financing. In a dynamic market like this, we want to help you build your winning strategy for 2025. We would love to hear from you.

-Seth Ludwick, Principal