By Huxley Somerville

Huxley Somerville, a managing director at Fitch Ratings, heads the CMBS ratings group.

With late 2012 and early 2013 mortgage rates on U.S. commercial real estate at historic lows, the upward trend seen in June shouldn’t have been a surprise to anyone. Perhaps the timing was a little earlier than expected; and perhaps the magnitude was greater than expected. But up was the only direction mortgage rates were going to move.

Huxley SomervilleMortgage rates are made up of two components—an interest rate component that is typically tied to U.S Treasuries; and a risk component, tied to swaps and reflective of the ‘riskiness’ of the loan. Recently, the interest rate component moved up 50-plus basis points, paralleling the upward move in Treasuries, while the risk component moved up 10 to 15 basis points. It is impossible to predict what rates will be on commercial....

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