Interest Rates - Long term fixed vs Commercial rates?

Question

We are closing on 3 loans later today.  So, the time to probably push back on rates, if there ever was an option to do that has probably passed.  However, we were quoted rates back I think in early March, which in a quick google search, it appears at least that the long term fixed rate mortgage rates have dropped about .2% - which would be significant enough to discuss/shoot for, obviously.  The banker had communicated that rates might change and I think we were quoted in the mid/high 5%, perhaps 5.88% if my memory serves.

I'm wondering if anyone has any feel for the relationship between how long term fixed stuff moves, and commercial mortgage rates move - should we be expecting that .2% drop, maybe a little more?

I see that the Fed's prime rate is at 5.50%

Any feedback appreciated.  Time is a little of the essence if any thoughts to be of use for our meeting/closing at 1:30 PM CST

Michael Seeker · Answer

@Jim Goebel - I'd say it's too late to push back on rates at this time...but do you even know what your rate is?  That's not clear from your post.

Typically a lender will quote you an exact rate (not a range) and they will lock that rate in.  If rates go up or down, you still get the rate that was quoted.

Additionally, commercial lenders do not move their rates as frequently and many I've worked with are tied to prime.  As you pointed out, though the 30-year rate has trickled down a touch, the prime rate has held steady at 5.5%.  I don't see anything that would indicate you should hope for or expect a better rate than what you were already quoted/expecting.

Jim Goebel · Answer

Thanks for input - rate ended up at 5.63% so dropped about .25% what we were initially discussed.

Fine by me!

Ashley Pimsner · Answer

@Jim Goebel you need to determine what index your rate is based on and what is your margin or spread.

For example, my commercial loan is based on the 5 year swap rate which was 2.32+ and a margin/spread of 2.83 which when added together gives you the final rate of 5.15.

Other things to consider are what your amortization will be, typically 20 or 25 years, when your loan will balloon, 5,7,10 years, and whether you have a prepay.