Mortgage association forecasts lending to fall 46 percent in 2023

According to the Mortgage Bankers Association (MBA), total commercial and multifamily mortgage borrowing and lending is expected to fall by nearly 50 percent this year.

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The association said borrowing and lending in that sector is expected to decline by $442 billion this year, a 46 percent drop from 2022’s total borrowing and lending in that sector of $816 billion.

“The logjam in the commercial real estate markets that began last summer has remained firmly in place,” Jamie Woodwell, MBA’s Head of Commercial Real Estate Research, said. “Questions about supply and demand dynamics for some properties, the rise and volatility in interest rates, and the low number of transactions and coinciding lack of price discovery have all contributed to a marked decline in demand for new mortgages. Unfortunately, those and other factors will likely continue to exert downward pressure on borrowing and lending volumes in the coming quarters.”

According to the association, multifamily lending is expected to drop 41 percent to $285 billion this year, down from $480 billion. However, MBA expects that borrowing and lending in commercial real estate will increase to $559 billion, with $339 billion being in multifamily lending, a nearly 19 percent increase.

“Commercial mortgage originations have historically followed property prices, and the uncertainty about the future path of interest rates has been a contributing factor to the current slowdown,” Woodwell said. “If interest rates and cap rates were to fall, that should help boost values and promote borrowing. If they remain higher for longer, as is increasingly likely, that will suppress activity. This uncertainty is a contributing factor in today’s slowdown.”