Multifamily borrowers facing loan maturities over the next several years are being squeezed by a sharp increase in refinancing costs and limited protection against further rate hikes. Newmark analysis cited by Connect CRE shows that multifamily loans maturing in Q3 2026 carried an average interest rate of 4.04%, while new loans are pricing at roughly 5.69% with an average cap rate of 5.5%. That shift is creating negative leverage for many borrowers, as debt costs outpace property yields.
The 165-basis-point rise in borrowing costs equates to an estimated 41% jump in interest expense on the same loan balance. Although multifamily owners have benefited from strong agency liquidity via Fannie Mae and Freddie Mac, which historically kept their spreads over benchmark rates tighter than those in other CRE sectors, Newmark notes that spread compression has largely run its course. With limited room left to narrow spreads, borrowers now have less of a buffer if benchmark rates move higher.
Much of the sector’s existing debt has not yet reset to the new rate environment. According to Newmark, about 81% of securitized multifamily debt maturing before 2029 still carries an interest rate below 5%. As those loans roll, the combination of higher coupons and flat or rising cap rates is pressuring debt service coverage and underwriting assumptions.
Separate research from CRED iQ underscores the scale of the equity shortfall. The firm estimates that borrowers with multifamily loans maturing through 2028 will need to contribute approximately $6,800,000,000 in additional equity to refinance. Reviewing every agency and CMBS loan maturing between October 2026 and December 2028, CRED iQ found that 23% of loans, accounting for 31% of the outstanding balance, require new equity. The median gap is about 15% of the loan amount, or roughly $25,000 per apartment.
Rising benchmark rates are enlarging that gap. CRED iQ reports that when SOFR increased from 3.62% to 3.85% in September, 178 loans totaling $4,000,000,000 fell below a 1.25x debt service coverage threshold, adding roughly $846,000,000 to the equity requirement. The firm estimates that each additional 25-basis-point increase would add about $1,000,000,000 more to the equity shortfall, and that two more such moves would leave 39% of maturing multifamily loans unable to refinance without additional capital. Loans originated in 2021 and 2022 at a median rate of 3.35% are particularly exposed, with 46% of those loans, representing 57% of the associated balances, needing fresh equity.
Despite these pressures, Newmark observes that the adjustment has so far manifested more in pricing than in widespread distress. Roughly 39% of multifamily properties sold have traded below their prior inflation-adjusted purchase price, up 6 percentage points from late 2021, and that share is expected to remain elevated as borrowers refinance into a higher-rate environment.
CBRE research cited in the article frames this as part of a broader “higher for longer” rate backdrop. The 10-year Treasury yield has held near or above 5% since early September, its highest level since 2007. CBRE notes that the pressure is most acute for multifamily and industrial assets, where cap rate spreads to the 10-year Treasury sit at less than 100 basis points. The firm expects cap rates to rise by at least 40 to 60 basis points in the near term and cautions that rent growth is unlikely to fully offset the higher cost of debt. CBRE anticipates that long-term rates could stabilize and begin drifting lower in 2027, with potential Federal Reserve cuts to short-term rates in 2028, supporting an eventual pickup in investment volumes in the second half of 2027, assuming no major macroeconomic shocks.
