Stop Waiting for the Rate Cut. Underwrite to 5%.

For most of the year, the plan for a lot of deals was simple: buy or build now, refinance when rates come down. That plan just lost its footing. On September 16 the Federal Reserve raised its benchmark rate a quarter point, its first hike since 2023, and its own projections show no cuts through 2027 [1][2]. The bond market moved even faster. The 10-year Treasury, which most fixed-rate commercial and rental loans price off, climbed from 4.79% on September 1 to 5.31% on October 5 [3].

That's roughly half a point in five weeks. On a deal sized to a 1.25x debt-service coverage ratio, a move like that can cut the loan amount enough to change whether the deal closes. If your refinance only works at the rate you hoped for in the spring, it doesn't work.

Why "wait for rates to fall" is the riskiest plan on the table

The driver this time isn't a booming economy. It's inflation, pushed up by energy prices: August CPI ran 3.4% with energy up 16.3% year over year [7], while Brent crude sits near $100 a barrel versus about $72 before the war began in February [8]. Central banks are leaning against it everywhere. The European Central Bank and the Bank of Japan both hiked in September, and three Bank of England policymakers voted to do the same [9][10].

When the Fed's own projections say no cuts until 2028, a refinance plan that depends on a cut is a bet against the people setting rates. Some deals will win that bet. We wouldn't build a business plan around it.

The rate isn't coming down to save the deal. The right structure might.

The opening and the trap in floating-rate debt

Here's the part most people are missing. Long-term rates rose about twice as much as short-term rates. SOFR, the base for most bridge, construction and fix and flip loans, was 3.90% on October 6 [4], roughly 1.4 points below the 10-year. Floating-rate money now looks cheap next to fixed-rate debt.

That gap is real, and for a value-add or construction plan it can be the right tool. But floating debt only works if the exit works. A bridge loan you plan to refinance into a DSCR or agency loan in 24 months needs to pencil at today's 10-year, not last year's. Choose floating debt because it fits the business plan, not because of the starting rate.

Credit hasn't dried up. It has gotten choosier.

The good news: capital is still moving. August was the strongest month for private-label CMBS since the start of the decade, with $11.6 billion priced and year-to-date issuance up 14.6% [11], and banks eased standards on investor commercial and multifamily loans in the Fed's latest survey [12]. But stress is rising in the loans written at peak values. KBRA puts CMBS delinquency at 7.7% and its broader distress rate at 10.3%, with office distress at 17.6% [6]. Close to home, a $56 million loan on Fiserv's Alpharetta office campus went to special servicing after missing its August maturity [13].

Flippers feel it too. ATTOM's latest report shows the typical gross margin on a flip fell to 21.5%, from 27.6% a year earlier [14]. The deals still work, but the cushion is thinner and the lender you pick matters more.

What we'd do now

None of this means stop doing deals. It means stop underwriting to a rate you hope for. Price the deal at the market you have, structure it to survive the market you might get, and shop it to more than one lender. Terms vary between lenders far more than most borrowers expect, and in a market like this one, that spread is where deals get saved.

This is an opinion editorial, not financial, investment, legal or tax advice, and not an offer of credit or financing. Predictions are the author’s views. Blue Ledger Capital arranges financing with third-party lenders and funders, who make all credit decisions and set all rates and terms.