Commercial mortgage rates move with benchmark rates, mainly U.S. Treasury yields and SOFR, plus a lender spread. When Treasury yields or SOFR rise, new loan pricing usually rises with them. This guide explains how each benchmark works and where to find current daily figures.
A benchmark rate is the market reference rate a lender starts from before it adds its spread.
How do Treasury yields affect commercial mortgage rates?
The yield curve shows Treasury yields across different terms. When long term yields fall, commercial mortgage borrowers usually see lower coupons, because lenders price new loans as the benchmark plus a spread. If spreads widen at the same time, borrowers lose part of that benefit, so it pays to watch both the benchmark and the spread. The Federal Reserve sets short term rates through the Fed Funds rate, and its decisions also shape the yield curve.
What is SOFR and how does it affect loan pricing?
SOFR is a daily benchmark for overnight borrowing costs, published by the Federal Reserve Bank of New York. Floating rate loans are priced as an index plus a spread, so when short term rates rise or fall, borrowers with a floating rate loan feel the change the most. Borrowers who have not yet closed on a floating rate loan can try to negotiate the removal of an interest rate floor, so the loan keeps the benefit of any rate cuts.
How does a swap connect to a floating rate loan?
With a swap, a borrower who has a floating rate loan agrees to pay a fixed rate and receives floating SOFR in return for a set number of years, for example 3, 5 or 10. The result is a fixed cost on a loan that would otherwise float. Our SOFR swap rates page explains more, and a swap quote for a specific loan is available on request.
Where can I see current benchmark rates?
Rates vary by lender, property and loan terms. Daily benchmark rates are on our commercial mortgage rates page. The figures come from the Federal Reserve Bank of New York and the U.S. Department of the Treasury, and each one shows its source and date. They are reference points rather than loan quotes, because the rate on an actual loan adds the lender’s spread, which depends on the property, the borrower and the loan terms.
To see which loan factors move the spread, read what determines your commercial mortgage rate.
Frequently asked questions
How do Treasury yields affect commercial mortgage rates?
Commercial mortgage rates move with benchmark rates, mainly U.S. Treasury yields and SOFR, plus a lender spread. When Treasury yields rise, new loan pricing usually rises with them, and when yields fall, borrowers usually see lower coupons, unless lender spreads widen at the same time.
What is a lender spread?
The spread is the amount a lender adds on top of the benchmark rate to price a loan. Spreads can widen or narrow over time. When spreads widen, borrowers lose part of the benefit of lower benchmark rates, so it pays to watch both the benchmark and the spread before locking in a fixed rate.
Who is most affected when short term rates change?
Borrowers with floating rate loans feel short term rate changes the most, because their rate is tied to an index that moves with the market. Borrowers who have not yet closed on a floating rate loan can try to negotiate the removal of a rate floor, so the loan keeps the benefit of any rate cuts.
Where can I find current benchmark rates?
The commercial mortgage rates page lists daily benchmark figures published by the Federal Reserve Bank of New York and the U.S. Department of the Treasury, each with its source and date. These are reference points, not loan quotes. The rate on a real loan adds a lender spread based on the property, the borrower and the terms.
