Monday Market Moves · September 21, 2026 · By Elliott Quigley

Fed Raises Rates 25 Bps: What CRE Borrowers Should Do Now — Week of September 21, 2026

Commercial real estate interest rates are back in focus following significant movement across the debt markets.

On September 16, the Federal Reserve raised the federal funds target range by 25 basis points to 3.75%–4.00%. Treasury yields also remain elevated, with the 5-year Treasury at 4.86% and the 10-year Treasury at 5.01% as of September 18.

For CRE borrowers and investors, however, the most important question is not simply whether interest rates will rise or fall next. It is whether the financing available in today’s market aligns with the property’s business plan and ownership’s investment strategy.

What Moved This Week?

The Federal Open Market Committee raised the target range for the federal funds rate by 25 basis points on September 16, bringing the range to 3.75%–4.00%.

Meanwhile, Treasury yields remain elevated. As of September 18, the 5-year Treasury was 4.86%, compared with 5.01% for the 10-year Treasury.

Those benchmarks do not affect every commercial real estate loan in the same way. Changes in short-term rates can directly affect floating-rate financing, while Treasury yields are commonly relevant to the pricing of fixed-rate debt.

How Does a Federal Reserve Rate Increase Affect Commercial Real Estate Loans?

A Federal Reserve rate increase generally has the most direct impact on short-term borrowing costs and floating-rate commercial real estate loans.

Many floating-rate CRE loans are priced using SOFR plus a lender spread. Changes in short-term interest rates can therefore affect the cost of bridge loans, construction loans, transitional financing, and other floating-rate debt.

Borrowers with existing floating-rate financing may also see higher debt service depending on their loan structure and any applicable interest-rate cap.

However, the Federal Reserve does not directly determine every commercial real estate interest rate. Fixed-rate loans are often influenced by Treasury yields, and the Treasury benchmark that matters most can depend on the term of the financing.

Why Is the 5-Year Treasury Important for CRE Borrowers Right Now?

In the recent period of elevated interest rates, the 5-year Treasury has become an increasingly important benchmark for many commercial real estate borrowers evaluating fixed-rate financing.

The reason is closely connected to loan term.

For many stabilized CRE assets, a three-year term may be too short unless the property has a more transitional business plan. At the other end of the spectrum, some borrowers may be hesitant to lock into a 10-year term while rates remain elevated.

That has made the five-year loan term an important middle ground for borrowers who want the certainty of fixed-rate financing without committing to today’s rate environment for a full decade.

As of September 18, the 5-year Treasury stood at 4.86%. For borrowers evaluating five-year fixed-rate financing, movements in that benchmark can be particularly relevant to loan pricing.

What Is the Difference Between SOFR and Treasury Yields for CRE Borrowers?

SOFR and Treasury yields can affect different types of commercial real estate financing.

• SOFR is commonly used as a benchmark for floating-rate CRE loans, including bridge and transitional financing.
• Treasury yields are commonly used as benchmarks for fixed-rate commercial real estate loans, with the relevant Treasury often corresponding more closely to the term of the financing.
• Five-year financing may therefore be particularly sensitive to movements in the 5-year Treasury.

This is why two borrowers entering the lending market at the same time can experience very different financing costs depending on the loan structure they are pursuing.

Should CRE Borrowers Wait for Interest Rates to Fall Before Refinancing or Buying?

Not necessarily. Trying to identify the perfect time to refinance or acquire a property can be difficult because interest rates are only one part of the investment decision.

For a refinance, that may mean determining whether current proceeds, debt service, loan term, amortization, and prepayment flexibility work with the property’s cash flow and ownership’s plans.

For an acquisition, it may mean determining whether today’s cost of debt still supports the projected returns and business plan.

If the numbers work under current conditions, waiting solely for a lower interest rate may not necessarily improve the investment. If the financing does not support the strategy, ownership can then evaluate whether waiting, changing the structure, contributing additional equity, or pursuing another capital source makes more sense.

What Are We Seeing on Live Deals?

The current rate environment reinforces why borrowers should compare the complete financing package rather than focusing on a single benchmark or quoted interest rate.

Across the market, lender appetite, leverage, amortization, interest-only periods, recourse, prepayment flexibility, and underwriting can create meaningful differences between financing options even when headline rates appear similar.

This is why commercial real estate loan structure can matter as much as pricing when evaluating a refinance or acquisition.

What Can Commercial Real Estate Borrowers Control in a Higher-Rate Market?

1. Lender Selection

Banks, credit unions, agencies, life insurance companies, and debt funds have different lending priorities, allocations, underwriting requirements, and return thresholds.

As a result, two lenders can evaluate and price the same commercial real estate transaction differently. Identifying the right capital source can have a meaningful impact on the financing outcome.

2. Lender Competition

Creating competition among lenders allows borrowers to compare more than interest rates. Important commercial real estate loan terms can include:

• Loan proceeds and leverage
• Lender spread
• Interest-only periods
• Amortization
• Loan term
• Prepayment flexibility
• Recourse or non-recourse structure
• Extension options
• Closing requirements

Evaluating these terms together provides a more complete picture of the true cost and flexibility of a CRE loan.

3. Loan Structure

The commercial real estate loan with the lowest interest rate is not automatically the best financing option.

A borrower planning to hold a property for 10 years may have different priorities than an investor planning to renovate, stabilize, and sell or refinance within three years.

The financing structure should support the property’s business plan and ownership’s investment strategy.

4. Timing

Borrowers do not need to wait for a specific Federal Reserve decision or Treasury yield before beginning the financing process.

Starting early gives borrowers time to understand what the current market supports, compare lenders and structures, and determine whether available financing works with their strategy. It also preserves flexibility if market conditions change while financing is being evaluated.

What Do Higher Rates Mean for CRE Owners?

• Do not evaluate a financing decision on rate alone. Compare proceeds, amortization, recourse, prepayment flexibility, interest-only periods, and other structural terms.
• Watch the benchmark that matches the financing. SOFR is relevant to many floating-rate loans, while Treasury yields can be particularly important for fixed-rate financing.
• Consider the planned hold period. A three-year, five-year, and 10-year loan can create very different flexibility for the same property.
• Create lender competition. Different capital sources can price and structure the same transaction differently.
• Start early. Entering the market before a financing deadline gives ownership more time to compare structures and react to changing conditions.

The Numbers

Treasury rates shown are U.S. Treasury daily par yield curve rates. Current Treasury figures are as of September 18, 2026.

What Should CRE Borrowers Focus on Next?

Interest rates matter, but they are only one part of a commercial real estate financing decision.

Rather than waiting for the perfect time to refinance or acquire a property, borrowers can evaluate what the lending market supports today and determine whether those terms align with their investment strategy.

If they do, today’s financing may make sense even in an elevated rate environment. If they do not, understanding the gap gives borrowers time to evaluate other lenders, structures, or strategies.

For borrowers approaching a refinance, acquisition, or other financing event, Essex Capital Markets can evaluate available options, identify appropriate capital sources, create lender competition, and manage the financing process from initial strategy through closing.

Talk With Essex Capital Markets

Sources

• Federal Reserve Board — September 16, 2026 FOMC Statement
• U.S. Department of the Treasury — Daily Treasury Par Yield Curve Rates
• Federal Reserve Bank of New York — SOFR

About Essex Capital Markets

Essex Capital Markets is a commercial mortgage brokerage firm providing financing solutions for commercial real estate owners, investors, and developers. The firm combines institutional-level execution with access to a nationwide network of lending partners to help clients identify competitive capital structures across a range of property types and transaction sizes.