US commercial mortgage default rate hits 3.4%
By Joshuah at 1 December, 2009, 7:19 am
The default rate for commercial mortgages in the US climbed to a fresh 16-year high in the third quarter of this year, as the property market continued to struggle under the weight of tight credit and falling rents.
During the third quarter the commercial default rate rose from 2.88 per cent to 3.4 per cent, the highest level since 1993, according to figures set to be released on Tuesday by Real Estate Econometrics, a property research firm. The quarterly increase was the third-highest since 2003 and the default rate has more than doubled in the last year.
“The dramatic decline in real economic activity and labour markets since last September has undercut property fundamentals, increasing the number of recently originated loans that are at risk for delinquency and default because of cash flows falling short of principal and interest obligations,” said Sam Chandan, chief economist at Real Estate Econometrics.
The rising default rate is bad news for banks, which hold more than 80 per cent of maturities on commercial real estate debt over the next two years. According to Real Estate Econometrics, during the latest quarter the total balance of delinquent and defaulted commercial mortgages jumped by 14 per cent to $50.3bn.
Source/Full Story: FT.com
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