💸 CRE Borrowing Costs Drop: Why Debt Markets Are Finally Loosening in 2025 📉

🏢 Lower CRE Loan Rates in 2025: Banks, Agencies & Private Lenders Are Back in the Game 🚀

CRE Borrowing Costs Drop as Debt Markets Loosen in 2025

After two years of high volatility, the commercial real estate (CRE) debt markets are finally loosening—and borrowing costs are dropping. Rates are down, lenders are re-engaging, and capital is flowing again. For investors and property owners, 2025 is shaping up to be the most favorable financing environment since early 2022.

Here’s what you need to know, and how Medallion Funds helps you capitalize while this window is open.

Fed Rate Cuts Reignite CRE Lending

The Federal Reserve delivered two rate cuts in 2025, bringing the overnight rate to 3.75%–4%. Even with the 10-year Treasury hovering around 4.1%, borrowing costs for commercial loans have pulled back significantly.

Because spreads have compressed and lenders are competing for deals again, borrowers are now seeing:

·Agency multifamily debt in the upper-4% range

·Life company loans in the upper-4% range

·Bank loans in the low-5% to low-6% range

·CMBS execution between 5%–7%

·Debt fund bridge loans between 6%–8%

This is meaningful—CRE interest rates are down nearly 50 basis points year-over-year.

Banks Are Reentering the Market

2024 was a cleanup year for banks. Many spent the year repairing balance sheets, increasing reserves, and navigating regulatory pressure. But in 2025, they’re stepping back in.

A few highlights:

·Bank share of CRE loans over $2.5M rose from 27% in 2024 to 33% in early 2025

·Still below the pre-2020 norm of 40%, meaning there’s room to grow

·Liquidity is improving as regional bank stress eases

·Regulatory tone has softened since mid-2024

This “bank thaw” is one of the most important drivers behind lower borrowing costs.

Private Lenders & Debt Funds Are Flooding the Market

While banks paused in 2024, private lenders filled the gap. Now they’re doubling down.

Debt funds raised $24 billion in the first three quarters of 2025, more than double last year’s pace. Their focus:

·Bridge loans

·Value-add projects

·Repositions

·Transitional assets

·Construction-to-perm structures

Because they underwrite with more flexibility, they help push spreads lower across the entire CRE ecosystem.

Rate Snapshot (Q4 2025)

Lender Type

Rate Range

Agency Multifamily

Upper-4%

Life Companies

Upper-4%

Banks

Low-5% to Low-6%

CMBS

5%–7%

Debt Funds

6%–8%

A Cautious Note: The Fed's Path Is Not Guaranteed

Markets originally priced in a 90% chance of another December rate cut. That has dropped to about 70%.

The Fed remains data-dependent. Inflation progress has slowed. Growth is steady but not guaranteed.

Borrowers should see today’s environment for what it is:

👉 A window—not a guarantee.

Time to Borrow While the Market Is Open

CRE isn’t “cheap” compared to 2020–2021—but financing today is the best it’s been in years. With lenders flush with capital, spreads narrow, and competition increasing, borrowers have a real opportunity to lock in favorable terms before the next cycle shift.

At Medallion Funds, we’re structuring:

·Multifamily

·Industrial

·Retail

·Office

·Mixed-use

·Construction

·Bridge-to-perm

…across 600+ lender relationships.

If you’re exploring a refinance, purchase, or bridge loan, now is the time to move.

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory