Value of Real Estate Loans Issued By Commercial Banks Essay

Value of Real Estate Loans Issued By mercantile Banks - Essay ExampleThe onset of the new millennium brought many developments for the banking sector globally. As such, the increase knowledge about mortgages and advanced exposure to access of finances meant that commercial-grade banking business was as hawkish as it was enjoying demand. In the year 2005, the United States economy was experiencing increased interests in housing and property development. Besides, the commercial banks increased their lending incentives in a bid to acquire the largest customer base of the growing character demand. In the first turd of 2005, the real estate loans for residential, commercial and farmland were 1.43%, 1.12%, and 1.70% respectively (Federalreserve.gov, 2015). The low-interest rates in comparison to those of the fourth quarter of 2004 acted as incentives for consumers who wanted to capitalize on the credit availability prospect provided for by the low-interest rates. As depicted in Figur e 1 below, the rates of exposure to loans for both Commercial Real Estate (CRE) and Construction and Land Development (CLD) was gradually increasing, thereby approaching the peak in 2005.The loan incentives put in place by commercial banks encouraged borrowing for risky mortgages, which menace to go up, as is always the case of property appreciation for assets in high demand. The first quarter of 2006 indicated the beginning of the gradual discrepancies in the interest rates, as the real estate loans for residential, commercial and farmland settled at 1.60%, 1.02%, and 1.53%.