Los Angeles, CA (PRWEB) October 03, 2014
Commercial mortgage financing has a buyer power score of 2.5 out of 5. This score reflects a negative market structure for buyers, including shifting pricing trends and moderate market risks. “Consequently, buyers have limited ability in discussing lower rates for commercial mortgages,” according to IBISWorld business research analyst Andrew Yang.
Although there are almost 28,000 different suppliers of commercial mortgages in the United States, market share concentration is moderate. These four banks have a significant leverage to set commercial mortgage financing rates throughout the country. Many other suppliers set and adjust their rates according to rates set by these banks. “Switching costs are also high, because commercial mortgage finance suppliers often charge financial penalties,” says Yang.
Pricing trends have been mixed for buyers. To buyers’ benefit, interest rates have fallen in the past three years. Due to limited demand from qualified businesses, banks, the primary supplier of commercial mortgages, have had an oversupply of funds to lend, leading to a decline in interest rates. However, prices are expected to accelerate significantly in the three years to 2017. The Federal Open Market Committee is expected to increase the federal funds rate, the rate at which banks borrow funds held at the Federal Reserve, in the next three years. This would increase banks’ costs for supplying loans. Suppliers are expected to raise the price of their loans to offset the rising cost of borrowing and, thus, protect profit margins.
Buyers benefit from relatively low to medium market risks. Many suppliers are dependent on capital from Federal Reserve. If the Federal Reserve charges higher costs for this capital, suppliers will charge higher rates for their mortgages. Additionally, buyers benefit from low vendor financial risks. After the financial crisis, banks and other lending institutions have become more financially stable. The federal government has placed stricter regulations on how much capital and assets lending institutions are required to hold. With moderate supply chain risks, buyers can expect a steady availability of commercial mortgage financing. Major vendors include Wells Fargo & Company, PNC Financial and Bank of America. For more information, visit IBISWorld’s Commercial Mortgage Financing procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of commercial mortgage financing. A commercial mortgage is a loan that uses a commercial real estate property as collateral. If the borrower defaults, the lender can seize the collateral as a form of repayment.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world’s leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
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