Low interest rate environments are intended by governments as a way of stimulating economic growth by encouraging business investment. However, those same low interest rates have created a significant barrier to banks working out their legacy of non-performing real estate lessons.
Created as a hedging instrument, swaps were intended protect real estate loans with high LTVs, which typically have low interest rate cover, against interest rate rises. However, as the financial crisis drove interest rates down to unprecedentedly low levels, these instruments have become increasing burdens on investors and, in the case of distressed sales, the recovery of value to lenders.
Source : CBRE