If the fed funds interest rates are lowered in line with current forecasts, then we believe interest rates on short-term (less than three years) residential debt should remain consistent.

Ultimately, the supply and demand of capital govern interest rates. If interest rates go down, then that could lead to a shift of capital from real estate debt to real estate equity, including large institutions potentially investing more in owning housing assets rather than funding loans. We believe these types of shifts in capital should help preserve rates and maintain the stability of market dividend rates.

Since loans are held until maturity, rather than being traded on a secondary market, there will be a recycling of capital into new loans as old ones are paid off. While there could be interest rate movements, our plan is to continue to seek out the best risk-reward opportunities on loans.

Below you can hear Cameron Wu, our VP of Investments discussing how interest rates could potentially impact the Private Credit Fund returns.