The chart above represents over five years of the four interest rates that I record weekly. As stated in previous blogs, the 5-year swap rate (in red) is the most interesting, because it is a pretty good indicator of what rate to expect for Medical Equipment and other finance. The swap rate last Friday was 2.54%, to which we add at least 2% for margin and risk, resulting in rates to my clients in the mid to high 4s.
My analysis of the trend remains down, because we continue to record lower lows and lower highs. But, if you need to invest in income-producing equipment, now would be a good time to lock in a really low 5-year rate. You may also want to consider bringing forward planned investments, such as equipment replacement or major upgrades.
I’ve been recording certain interest rates on a weekly basis for several years, and it’s interesting to note that, for the first time in decades, the five-year swap rate fell to under 3%. (For the uninitiated, the swap rate is the rate at which banks will lend to each other.)
The significance for those who need Medical Equipment Finance or any other form of Asset Finance is that you should be able to secure a five-year loan at close to 5% (assuming that lenders need ~200 basis points for margin and risk).
Also for the first time, the best three-year and five-year term deposits are in ‘lock-step’ at 4.2%.
We’ve all heard that the rates available for the finance of Medical Equipment and other assets varies with each bank’s cost of funds. The mix includes the rates paid for deposits locally, the rates paid to other banks locally, and the rates applicable to the international market. The Feds have been sitting on a proposal that the banks make their cost of funds transparent, but after many months of inaction, it appears that nothing will come of it.
So, I’ve started tracking the weekly movement of four rates, and after about three months of data collection, I can report a slight downtrend in all but the 90-day swap rate. The other three are the 5-year swap rate, the 3-year term deposit rate, and the 5-year term deposit rate. I’ll publish the graphs periodically.