Multifamily owners approaching loan maturities are confronting a meaningfully more expensive debt market, according to new research from Newmark. The firm reports that borrowers refinancing today are seeing interest costs that are 41% higher than on the loans now coming due, a shift that is reshaping underwriting and return expectations across the sector.
Newmark notes that multifamily loans maturing in the third quarter of 2026 carried an average interest rate of 4.04%. Comparable new originations are now pricing at an average rate of 5.69%. This delta reflects the run-up in benchmark rates combined with already tight loan spreads, leaving limited cushion for borrowers as they reset financing.
Cap rates have not adjusted to fully offset the jump in borrowing costs. Newmark reports that multifamily cap rates have averaged 5.5% in recent months. With debt costs now averaging 5.69%, many transactions and refinancings are occurring in a negative leverage environment, where the going-in yield on the asset is below the cost of debt.
The persistence of negative leverage has become a notable theme in multifamily over the past several months. With loan spreads described as already narrow, Newmark suggests that borrowers have relatively little protection against any further increases in benchmark interest rates. That dynamic heightens sensitivity to rate volatility for both existing owners and prospective buyers.
Despite widespread concern about a looming wave of loan maturities, Newmark observes that the expected spike in distressed situations has not fully materialized so far. However, the pressure is showing up in pricing rather than headline distress metrics. The research highlights that property sale prices are exhibiting signs of strain as investors reprice risk and adjust their assumptions to the higher-rate backdrop.
Authors Joe Biasi, Will Levy and Mike Wolfson point out that roughly 39% of multifamily properties sold recently have traded below their prior inflation-adjusted purchase price. At the end of 2021, only about 6% of trades were in that category, underscoring how quickly the interest-rate shock has flowed through to asset values. The shift indicates that a growing share of sellers are accepting real, inflation-adjusted losses on exit.
Newmark expects the proportion of trades closing below previous inflation-adjusted purchase prices to remain elevated. As more borrowers refinance into today's higher interest rate environment, the combination of increased debt service, limited spread protection and negative leverage is likely to keep pricing under pressure, even absent a broad-based wave of formal distress.
For market participants, the data underline the importance of carefully sizing leverage and stress-testing cash flows against further rate moves. With cap rates trailing debt costs, equity returns depend more heavily on rent growth, expense control and business-plan execution at the property level, while lenders and investors monitor how borrowers navigate upcoming maturity schedules.
