Given the shifts in Federal Reserve policy, floating-rate debt has recently become more appealing for some. Is it right for you, though?
When considering a floating rate loan, it is important to consider the sunset of LIBOR (London Interbank Offered Rate) as a benchmark rate over the next few years. For this transition to be completed, more than $200T in global asset financing will need the index to be shifted from LIBOR to SOFR.
The impetus for this change is to track a more representative index rate. Currently, LIBOR averages just $1B in actual transaction volume per day. In comparison, SOFR is derived from more than $780B in average daily transaction volume.
This transition will influence all new and existing adjustable rate loans. To help determine if floating-rate debt is right for your business, we have outlined the current state-of-affairs for the three short-term rates, and dive into what we expect of the shift from LIBOR to SOFR.
We’ve published a report that discusses how this transition will influence all new and existing adjustable rate commercial real estate loans. Key takeaways are:
To read more, download our full report.