The Number That Sets Your Next Mortgage Rate
Most business owners watch the Fed. But if you own your building, the number that matters more is the 10-year Treasury yield, because most fixed-rate commercial mortgages are priced as a spread above it.
On September 30, the 10-year closed at 5.29%, above its June 2007 peak and its highest close since May 2002. [1][2] It has stayed above 5.2% into October. [2]
For comparison, the 10-year was about 1.35% in December 2021. [3] Many commercial mortgages written five to ten years ago were priced when long-term rates were a fraction of today's.
The Refinancing Wall
More than $1 trillion in commercial mortgages must be refinanced, much of it originally locked in at those historically low rates. [3] For the past two years, lenders often extended maturing loans and waited for rates to fall. They didn't, and that approach is getting harder to sustain with the 10-year above 5%. [2][3]
Banks are heavily exposed. U.S. commercial banks held about $3.14 trillion in commercial real estate loans as of late September, the most in Federal Reserve data going back to 2016. [3] When lenders hold that much exposure in a higher-rate market, they tend to tighten underwriting on new and refinanced loans.
Why This Hits Owner-Occupied Businesses Too
Headlines focus on office towers and big landlords. But the same math applies if your business owns its warehouse, shop or office and the mortgage has a balloon payment coming up.
Here's a simplified example of what a refinance can look like when rates reset:
| Original loan | Refinanced | |
|---|---|---|
| Loan balance | $1,500,000 | $1,500,000 |
| Interest rate | 4.25% | 7.00% |
| Amortization | 25 years | 25 years |
| Monthly payment | ~$8,100 | ~$10,600 |
| Annual difference | ~$30,000 more |
Illustrative only. Your rate depends on your property, your business's financials and the lender.
That extra $30,000 a year has to come from somewhere. And because many lenders size loans by debt service coverage, a higher rate can also mean the lender will only refinance a smaller balance, leaving you to pay down the difference at closing.
Five Steps to Take Before Your Maturity Date
1. Know Your Date and Your Terms
Find your maturity date, balloon amount and prepayment penalty. If maturity is within 24 months, you're already in the window to start planning.
2. Run Your Numbers at Today's Rates
Calculate your payment at current market rates, then check whether your business's cash flow covers it with room to spare. Lenders typically want to see coverage of 1.25x or better.
3. Look at SBA 504 for Owner-Occupied Property
If your business occupies at least half of the building, the SBA 504 program may be an option. Its debenture rates are fixed for the life of the loan and ranged from 6.30% to 6.97% in October 2026, depending on term. [1] Keep in mind the SBA's tighter rules that took effect October 1, including the citizenship requirement for owners. [4]
4. Start 6–12 Months Early
A commercial refinance needs an appraisal, environmental review, financial statements and underwriting. Starting early gives you time to compare lenders and avoid accepting whatever terms are available a month before your balloon is due.
5. Build Cash Now
If the refinance is likely to come in smaller than your current balance, start setting cash aside today so a pay-down at closing doesn't hurt your operations.
Should You Wait for Rates to Fall?
It's tempting. But the Fed raised rates in September, and its officials expect at least one more increase this year. [5] Long-term yields respond to inflation and government borrowing as much as to the Fed, and inflation just accelerated to 3.7%. [6] Nobody can tell you where the 10-year will be next year. If your maturity is close, planning around a rate drop that may not come is a risk you don't have to take.
The Bottom Line
The refinancing wall is real, and it doesn't only affect big landlords. If your business owns its property and the loan matures in the next two years, now is the time to run the numbers, look at all your options and start the process early.
DirectCredit can match you with lenders offering conventional commercial mortgages and SBA 504 loans, so you can compare real terms side by side.
Sources
- Lendio, Current SBA Loan Interest Rates, October 2026 (10-year Treasury and SBA 504 rates)
- Federal Reserve Bank of St. Louis (FRED), Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity (DGS10); The Real Deal, Treasury Yields Hit Highest Levels in Almost 20 Years
- 24/7 Wall St., Commercial Real Estate Is Slamming Into a Trillion-Dollar Wall
- Edison Business Advisors, New SBA 7(a) Loan Program Requirements Effective October 1, 2026
- Investinglive, FOMC Minutes: Most participants assessed another hike would likely be appropriate by year end
- U.S. Bureau of Labor Statistics, Consumer Price Index – September 2026
