Timing issues becoming critical for healthcare borrowers.

Senior housing/healthcare borrowers who have remained committed to floating interest rate instruments need to recognize that time no longer is on their side.

"Recent movement in long-term interest rates should provide all the incentive these borrowers need to reassess current funding strategies," funding expert Jeffrey A. Davis believes.

Davis is Chairman of Cambridge Realty Capital Companies, one of the nation's leading senior housing/ healthcare lenders.

He points out that after stubbornly resisting nearly two years of prodding by the Federal Reserve Board, long-term interest rates have begun to make across-the-board advances.

"Perversely, the capital markets effectively thwarted monetary policy initiatives aimed at slowing the nation's economic growth rate. When the Fed began raising short-term interest rates in June 2004, interest rates on credit cards and home-equity loans began to drift higher. But other rates remained unchanged and some actually declined," he noted.

For example, Davis points out that interest rates on 10-year Treasury notes dropped from 4.87 percent in June 2004 to 3.89 percent a year later. In December of last year, the yield on a 10-year U.S. Treasury note had dropped below the yield on a two-year note, an unusual event known as a yield-curve inversion.

"But things have begun to look a bit more normal in recent weeks," he points out.

Most notably, the yield on the 10-year Treasury note recently rose to 4.9 percent to match a two-year peak set in May 2004.

Rates on 30-year home mortgages, which typically run almost two percentage points higher than the 10-year Treasury note, were also on the rise, along with corporate bond rates.

"Some analysts are predicting yield on the 10-year Treasury note is on a run that will lift it above 5 percent. Presumably, the same tide will be lifting all ships," Davis said.

Going forward, it's more likely that the Fed will be more effective in steering rate trends in the U.S., he believes.

"Before, on a global scale, the Fed was largely isolated in its efforts to control economic growth and rising inflation in the U.S. What's essentially different today is that central bankers in both Europe and Japan are now utilizing tighter monetary policies to constrain similar economic growth spurts in their respective economies. "This should force yields in the U.S. higher to compete with improving returns on euros and yen," he added.

Davis points out that monetary experts don't expect any sudden directional changes in the foreseeable future.

"It was never likely that the inverted yield curve would remain in place indefinitely. When it's possible to do so, senior housing/healthcare borrowers are well advised to lock in long-term fixed rates at today's relatively low levels," he said.