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What are the Current Commercial Bank Interest Rates and How Do they Compare to Times in the Past?




Are you curious about what it would cost you to buy a business or building in the current economy?   I am and I wondered about what history could tell us about where rates might be going. 


Historical interest rates provide a fascinating glimpse into the economic trends and shifts over the decades. From what I can determine interest rates have traditionally been in the 3-5% range with investors looking for higher 10% returns or Cap rates in order to cover these rates.  From a banking point of view some of what I have been able to glean from a quick scan of the internet is this. 


In 1752, the British government converted all its outstanding debt into one bond, the Consolidated 3.5% Annuities, in order to reduce the interest rate it paid. Five years later, the annual interest rate on the stock dropped to 3%, adjusting the stock as Consolidated 3% Annuities.

The coupon rate remained at 3% until 1888, when the finance minister converted the Consolidated 3% Annuities, along with Reduced 3% Annuities (1752) and New 3% Annuities (1855), into a new bond─the 2.75% Consolidated Stock. The interest rate was further reduced to 2.5% in 1903.Interest rates briefly went back up in 1927 when Winston Churchill issued a new government stock, the 4% Consols, as a partial refinancing of WWI war bonds


World War II (Late 1940s - Early 1960s):Interest rates were relatively low during this period. The main interest rate hovered around 2% to 3%. This stability supported post-war economic growth and expansion.


1970s - Early 1980s:This period was marked by high volatility in interest rates, largely driven by high inflation. The rates peaked dramatically in the early 1980s, reaching as high as 20% in 1981. This was part of the government's aggressive policy to combat the rampant inflation of that era.


Late 1980s - 2000s: After the extreme highs of the early '80s, interest rates began a gradual decline. By the mid to late 1990s, they had stabilized somewhat, with the prime Rate generally ranging between 3% and 6%.


2008 Financial Crisis: In response to the financial crisis and ensuing recession, in the US the Fed slashed rates to near-zero levels (0-0.25%) to stimulate economic activity and Canada followed suit but not to the same level. These historically low rates persisted until 2015, as the economy slowly recovered.


Post-2015: The prime rates gradually increased  from December 2015, reaching about 2.25%-2.5% by late 2018. However, in 2020, due to the economic impact of the COVID-19 pandemic, rates were once again cut back to near-zero levels.Unfortunately in the last couple of years we have seen interest rates rise in the government's attempts to combat inflation which was stimulated by the federal government measures to increase spending and provide liquidity into the economy. 



So what are the rates like now?

 Last week I conducted a survey of my local bankers and was told the following. 


Canadian Western Bank - Sarah Trottier

What are the commercial rates range of lending at the moment?

  • Rates are on a downward trend when it comes to fixed pricing in the current market;

  • Commercial mortgage rates for owner-occupied properties (based on a 25-year amortization) are ranging between 6.6% and 5.91% for terms of 1-5 years respectively;

  • Important to note that owner-occupied real estate terms can now be extended to a 30-year amortization which can have very positive impacts on cashflow;

  • 3 to 5 year fixed money is reporting more favourable pricing for those borrowers who are prepared to commit to the longer duration of term(s);

  • The above are conservative rates with pricing being based on multiple factors including but not limited to total client holdings with CWB, amortization requested, type of property (ie. light industrial/office/retail strip etc.) and overall borrower risk ratings

  • Rates presented above are indicative only and subject to change;

 

What types of commercial lending do you prefer at the moment. 

  • CWB remains open to lending in all types of industries; we will work with Borrower’s in any industry to determine the best structure for their individual needs and cashflow requirements;

  • Aggressive pricing and terms can be available for owner-occupied real estate and for all full banking relationship clients*;

  • *full banking relationship criteria must be met and can be customized for individual needs; ask us how you can qualify;

  • Unique and competitive lending packages are available for Professionals*

  • *Professional Program includes but is not limited to Medical Doctors (General and Specialists), Accountants, Dentists, Veterinarians, Optometrists, Engineers, Lawyers & Notaries

Feel free to Contact

Sarah Trottier 

SR. Relationship Manager, Commercial Bankingt. 250-649-3101 | f. 250-612-0129 | c. 250-552-0044




CIBC Braden Cook

  1. Interest rates are generally based on company risk profile, however a baseline we typically offer a floating rate of Prime +1%, with room for adjustment. As well as 1 – 5 year fixed rate options.

 

  1. We are interested in owner occupied real estate, with flexible terms.

 

  1. CIBC looks for long term relationships to help grow your business, to offer advice and products that match the business needs.


Feel free to contact

Braden Cook, B.Comm | Manager | Commercial Banking | Northern BC | CIBC1410 3rd Ave, Prince George, BC  V2L 3G2 | Tel: 250 614-6444 ext. 453 | Cell: 250 552-1596 | braden.cook@cibc.com



Scotia Bank Response from Kurtis Friend


  1. What are the commercial rates range of lending at the moment?

 

High level, I would say rates are generally ranging from 5.5%-7.5% (depending on term, asset being financed and overall risk of the borrower).

 

2. What types of commercial lending do you prefer at the moment. 

 

We enjoy working with strong operating companies, across all sectors! That said.. a couple of areas which have been a focus as of late are:

 

  • Cash-Flow Lending (ie; Acquisition Financing, MBO’s)

  • Owner-Occupied Real Estate (50%+ of building occupied by op. co.)

  • First Nations’ (and related economic development entities)

 

Feel free to contact  

Kurtis Friend | Sr. Client Relationship Manager

_____________________________________________________

Scotiabank | Commercial Banking Distribution

390 Victoria Street

Prince George, BC, Canada, V2L 4X4

C 778.675.4920


Beem Credit Union - Formerly Interior Savings Credit Union

 What are the commercial rates range of lending at the moment? 


We are seeing anywhere from Prime + .50 – 2.0 depending on credit quality and/or depth of relationship we have with a client. Recently closed a Commercial Revenue property (not owner occupied)  for 5-year term at 5.94% with a .50% fee.    

 

 

2. What types of commercial lending do you prefer at the moment. 

 

Larger Deals : (10mm +) Multifamily Construction, Commercial Construction, seeing more CMHC Insured Construction and Take out, Hospitality (larger market).  

Medium size deals:  (1-10mm) Commercial Building purchases, Hospitality (small market) Receivable and Inventory Margining, and Equipment.  

Small Business: under (1mm) lots of Line of Credit requests as businesses adjust to paying back CEBA loans and the cash crunch that might have caused. Also new and used equipment purchases seem to be on the rise.   

 

We are open to looking at almost any type of deal outside of highly speculative transactions like raw land to hold as investment (no development plan) long term.  We are open to Spec home projects with tight controls in place.

 

Anything else you would like to say to possible borrowers about your institution:

Beem Credit Union (Previously Interior Savings/Spruce Credit Union) is actively looking for lending opportunities across the entire Province with 53 Branches from Fort Nelson to Grand Forks to the Lower Mainland. We are ready to serve your Commercial needs.     


Feel free to contact

Malcom Dunn

Regional Manager, Commercial Services

Interior Savingsemail mdunn@interiorsavings.com

T: 250 469 6519 Local: 6519



1. What are the commercial rates range of lending at the moment?

 As low as mid 6% on long term fixed rates or 7.8% on floating rate, and rates increase from there based on the risk of the transaction.

2. What types of commercial lending do you prefer at the moment. 

High loan-to-value loans on industrial and commercial land and building purchases; and business acquisitions regardless of the value of the assets


Feel free to contact

Brian Woodbeck

Senior Account Manager | Directeur principal

T  250-561-5336     C 250-649-6606     F 250-561-5512   



Integris Credit Union - Sandra Rose


Rates are a tough one to give an estimate on.  It is so deal specific depending on the project, management team, level of investment, financial results.  


A 5 year fixed rate secured by mortgage is approximately 6.30% to 6.50% right now


Integris is open to all industries.  We are financing commercial and industrial property purchases, renovations, equipment, working capital, multi family residential construction projects


Feel free to contact 

Sandra Rose

Senior Manager, Commercial Services

1532 6th Avenue, Prince George, BC  V2L 5B5

T: 250-612-3556

TF: 1-866-554-3456



RBC Norm Hebert

1.What are the commercial rates range of lending at the moment?

We (RBC) are seeing fixed rates climb over the past month with Canadian Bonds going up. March was seeing 5 year / 25 year amortization rates hovering between 5.50-6.50% for good borrowers. Now late April we are looking at rates from 6.00 – 7.00% range.  Canadian Bonds follow the markets and a good gauge on where bank fixed rates . (see link: https://www.marketwatch.com/investing/bond/tmbmkca-05y?countrycode=bx)  


2. What types of commercial lending do you prefer at the moment. 

RBC is open for business with all commercial lending. Qualifying based on cashflow repayment and value of security to support the loans has remained static. RBC is happily competing head to head for rates and amortizations with all Financial Institutions. There has been a recent emphasis on franchises with a very competitive offer as well as special pricing for Health Care Professionals, ( Medical Doctors, Dentists, Veterinarians & Optometrists). Personally I specialize in Real Estate transactions.

 

Feel free to contact

Norman Hebert | Senior Relationship Manager, Commercial Financial Services I 550 Victoria Street, 2nd Floor, Prince George, BC  V2L2K1 | RBC Royal Bank | Royal Bank of Canada | T. (250) 960-4594 | M. (250) 552-1466


Conclusion:


Bank rates have fluctuated all through history. As you can see there is a diversity that reflects the institutions' varying strategies to accommodate different types of borrowers and their specific needs in the current economic environment.  Depending on what you are looking for currently please feel free to reach out to any of the professionals listed above, they will happily answer any of your questions related to financing commercial properties or businesses. 


I hope you enjoyed the read, let me know if you have any questions about commercial real estate or would like to hear more from other experts. 


David Fuller, MBA, Realtor

250-617-7467


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