As we move into the second half of 2022, lenders need to be adequately prepared for what lies ahead. We have seen several occurrences these past few months since the year began and their impact on the lending business. Here are some projections on what to expect as the remainder of 2022 shapes up.

  1. Interest rates will continue to go up: The Federal Reserve Chairman Jerome Powell plans to raise the federal funds rate by 50 basis points each time the Fed meets if inflation remains under control. This puts increasing yield pressure on various private lending sectors.
  2. Origination shops will continue to be sought after: Portfolio lenders and origination shops will continue to be acquired or attracted by aggregators and lenders. As a result, while some industries (DSCR) may experience a decline, others (SFR) will continue to prosper.
  3. Record number of private lending transactions: Despite the higher returns, the volume of private lending in 2022 will exceed all previous years. What was once a $500 million market has grown to $1 trillion, and I believe it will reach $2 trillion this year.
  4. Wall Street is here to stay: In private lending, Wall Street is here to stay. Lenders understand it, and even when yields rise, and the delta approaches that of the banking industry, Wall Street has bought into and likes the private lending product lenders have to offer.
  5. Interest rates will eventually make their way into private lending: Because of the downward pressure of money flowing into the area, the upward pressure of rising interest rates has not been transmitted through. However, the rising pressure on Wall Street will result in more expensive securitizations, leading interest rates on private lending borrowers to ultimately rise.

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