Mortgage Calculator

Back in the day, engineers had slide rules, and investors and bankers had mortgage calculators.  The one on the right could be adjusted down to the lowest conceivable lending rate so the borrowers could look up to the monthly payment for a range of amortization periods.

Obviously this tattered calculator is pretty old since the lowest lending rate is 5%.  Today's historically low rates are one reason why the REIT sector is predicted to maintain high returns this year.  Last month's SKYLINE COMMERCIAL REIT information sheet showed the Average Weighted Mortgage Rate at 4.25%.  That's literally off the calculator chart meaning lower operating costs.  Over the last year InterRent REIT extended the average life to maturity from 2.5 years to 4.7 years and lowered the weighted average interest rate by 68 basis points from 4.28% at Q4 2011 to 3.60% at Q4 2012.  Yes, we need a new mortgage calculator.

Many REITs will benefit from rates staying low due to their longer average terms (and which means they are averaging down their costs with each renewal).  It stands to reason that those with the shortest aggregate terms have the most to lose when (if) rates go up - these REITs have already rolled a larger percentage of their loans into today's lower interest mortgages.