Markets are now pricing zero rate cuts through 2026. That’s not a typo. After months of hoping for three, two, or even one cut, the bond market has given up. And if you’re a CRE borrower waiting for rate relief to make your refinancing math work, you need a new plan.
What Changed
Three things converged in the last 30 days:
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PCE inflation surged 0.7% in a single month — the largest jump since June 2022. Mohamed El-Erian called it a week where “the velocity of change outpaced the capacity of some frameworks to contain it.” He’s right.
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The Fed held steady with three dissenters — unusually high dissent that signals deep internal disagreement on policy direction.
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Bond traders are now pricing a rate hike as more likely than a cut. According to Bloomberg’s Edward Bolingbroke, swaps linked to Fed rate decisions show more than 50% probability that the Fed raises rates by April 2027.
What This Means for Your CRE Debt
If your loan matures in 2026 or 2027, the refinancing math you ran six months ago is wrong. Here’s what’s different:
Floating-rate borrowers: Your SOFR-based payments aren’t coming down. If you don’t have a rate cap, the cost of getting one has increased substantially. If your cap is expiring, budget for a significantly higher replacement cost.
Fixed-rate borrowers approaching maturity: You’re refinancing into a rate environment that’s 150-200 basis points higher than when you originated. Your DSCR at the new rate may not pass covenant tests.
Bridge loan borrowers: Extension options that seemed like insurance are now lifelines. Exercise them if you can. The permanent market isn’t any more favorable than it was at origination.
Three Things to Do This Week
1. Re-run your refinancing scenarios at today’s rates
Don’t use the rate you hope for. Use the rate you can get. As of this writing, that’s roughly 6.5-7.0% for conventional CRE permanent debt, depending on property type and leverage.
2. Talk to your rate advisor about hedging strategies
If you’re floating and unhedged, the window to lock in protection is narrowing. Every basis point the market prices in a potential hike makes caps and swaps more expensive.
3. Stress-test your covenant compliance
At LoanBoss, we see this constantly — borrowers who pass their DSCR tests today but would fail at refinancing rates. Run the numbers before your lender does.
The Bottom Line
The rate environment has shifted from “when will cuts come” to “will the next move be up or down.” That’s a fundamentally different world for CRE borrowers. Stop planning for the rate environment you want and start managing the one you have.
JP Conklin is the founder and CEO of Pensford and LoanBoss. He has spent 20+ years advising CRE borrowers on interest rate strategy.