RE Finance Flashcards
Federal Prime Rate (8%)
This is the interest rate that commercial banks charge their most creditworthy customers. It’s often used as a benchmark for various loans.
Secured Overnight Financing Rate (SOFR)
A benchmark interest rate for borrowing cash overnight backed by U.S. Treasury securities. Many construction loans are tied to SOFR, with lenders adding a spread (additional interest) on top of it. The different SOFR rates (1-Month, 3-Month, etc.) indicate the average rates for borrowing over those specific time frames.
SOFR Rates Oct 2024
1-Month SOFR (4.83%)
3-Month SOFR (4.65%)
6-Month SOFR (4.44%)
1-Year SOFR (4.12%)
These rates show the cost of borrowing for different durations, typically reflecting expectations of future interest rates and inflation.
Federal Funds Rate (4.75% to 5%):
The interest rate at which banks lend reserve balances to other banks overnight. This rate is a key tool for monetary policy.
Annual Inflation Rate (2.44%)
This measures the rate at which the general level of prices for goods and services is rising, indicating purchasing power erosion.
US Treasury Rates (Oct. 2024)
1-Year Treasury Rate (4.17%)
2-Year Treasury Rate (3.927%)
10-Year Treasury Rate (4.0%)
These rates represent the yield on government bonds for different maturities, reflecting the cost of government borrowing and investor expectations for future economic conditions.
Treasury Bills (T-Bills)
These are short-term government securities that are sold at a discount and mature in one year or less. The rates listed show the return on T-bills for various terms, indicating how much investors are willing to earn for lending to the government for a short time.
US Bonds:
20-Year Bond (4.039%)
30-Year Bond (4.015%)
Longer-term securities that pay interest over time, these rates reflect the cost of borrowing for the government over extended periods.
Mortgage Rates:
30-Year Fixed Rate (6.64%)
15-Year Fixed Rate (6.10%)
5-Year ARM (6.55%)
These rates indicate the interest borrowers pay on their home loans. Fixed rates remain constant over the loan term, while adjustable-rate mortgages (ARMs) can change after a set period.
Other Lending Rates
Ground Up Construction Rates (8%+): These are loans specifically for new construction, typically higher due to increased risk.
Hard Money Lending Rates (11%+): Short-term loans secured by real estate, often used for quick funding, usually at much higher rates due to the risk involved.
Savings Accounts
Highest Interest Rate for Bank Savings Account (5%): This is the highest interest rate currently offered by banks for savings accounts, reflecting the return on deposit accounts.
