Source: Real Estate Capital Europe —
Calls from concerned real estate clients have been coming into the London office of risk management firm Chatham Financial with increasing regularity in recent weeks as borrowing rates in the industry have steadily increased.
“We’ve had a very large number of calls from infrequent hedgers, and people we hadn’t talked to for a long time,” says Jackie Bowie, head of Europe for the firm, “and it’s down to how much interest rates have moved lately.
In the past 12 years, ultra-loose monetary policy has meant that few real estate borrowers have wasted any sleep worrying about interest rate risk. Many would opt to hedge floating-rate loans with an inexpensive cap, which sets a ceiling on payments if rates were to rise. For years, hitting that ceiling seemed a remote prospect.
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