The banks providing commercial loans that keep Greater Boston’s commercial real estate markets churning are competing harder than ever before for the opportunity to lend money to investors, especially for loans to the middle markets.

Industry experts agree that the Northeast has one of the healthiest banking systems in the country. And core coastal, gateway markets – like New York, San Francisco and Boston – are highly liquid, with investors seeing strong yields from stabilized properties.

Now that people’s savings habits have changed, and they are less invested in the stock market and more invested in their savings accounts, banks are flush with cash and have more money on hand than in the recent past. They need to invest it somewhere to gain returns – and commercial real estate lending is booming.

“If you have a stable property with a predictable cash flow from credit tenants and long leases, or you have substantial occupancy from a diverse tenant base, you’re in a very favorable position and there’s a lot of competition among lenders for those kinds of opportunities,” said Jonathan Davis, president of the Davis Cos.

Not only are they more competitive, but banks are being more aggressive with their lending incentives to attract business – like offering historically low interest rates and eliminating pre-payment penalties – than they have been in more than a decade, said Lauren O’Neil, a director with Holliday Fenoglio Fowler.

Much of that activity is taking place in the middle markets, for loans between $5 million and $30 million. It’s a result of a larger playing field – there’s a much larger group of banks, like People’s United, Webster and First Niagara banks – that are lending in that bracket.

“They’re blowing life companies and CMBS lenders out of the water because they are not willing to offer the same terms,” O’Neil told Banker & Tradesman. “Commercial borrowers are looking for pre-payment flexibility and other concessions, which you get with a bank,” and not from the behemoth life companies.

What has changed since the market peaked before the recession is that, back then, lenders were financing 80 percent of a deal, with the borrower required to hand over just 20 percent. Now, the ratio is more like 60 to 65 percent loan to 40 and 45 percent cash. And interest rates are 3 to 3.5 percent for a five-year loan, or 3.75 to 4.25 percent for a 10-year deal.

So, sales transactions are occurring with very advantageous pricing for sellers, because the next buyer can get really good financing and still hit the returns they’re aiming for. It also opens up more options for existing owners to hold their properties longer because it’s easier to refinance.

“Boston has a strong group of local lenders providing financing at rates we’ve never seen before,” said Frank Petz, head of capital markets for Jones Lang LaSalle in New England. That leverage allows the owners to realize very strong cash on cash yields. “If you buy a building for $20 million with $10 million debt, that debt costs 3 percent, but if you buy the building with a 6 percent yield, all of a sudden you have a 12 percent yield on the equity. Owners have a variety of reasons to trade, whether it’s trying to capture profits, or in anticipation of capital needs elsewhere, or if it’s simply that they have stabilized product.”