Lenders 2024: CRE Lenders Wager the Over/Under on 2025 Interest Rates

“Laaaadies and gentlemen! Step right up, and place your bets!” 

No lender would call what they do gambling, per se. Sure, the risk-reward spectrum is something they happily dabble in, but when it comes to putting their dollars on black or red in a market with ample uncertainty, they’re a little more shy. (Especially after the past four years, amirite?) 

So, we gave them a li’l wiggle room and asked whether short-term interest rates will be above or below 4 percent on July 1, 2025. 

Sure, the Fed will make its rate decisions based on the health of the economy and a number of other factors, including inflation, economic data and GDP, but predicting cuts or where interest rates will land is trickier today than even Run-DMC can lament. 

After all, many were lulled into a false expectation of several cuts in 2024. The relief and joy was palpable at January conferences where six rate cuts in 2024 seemed to be the expected number and hearts were all a-flutter — and yet here we are with just one 50 basis point cut by the first week of November. Still, while caution is warranted, most signs point to at least some additional cuts in the near future, and so we asked our lenders where the chips might fall eight months from now. 

Clarion Partners’ Drew Fung hedged his bets (and clearly missed his calling as your local representative) by answering: “My guess is rates remain elevated longer than market consensus. How’s that for a political answer?” 

(Very good, Fung. You’ve got our vote.) 

Acore Capital’s Tony Fineman also held his cards close to his chest by simply saying: “Yes.” 

As for Starwood Property Trust’s Dennis Schuh, he played the contrarian, saying: “Because everyone wants it to be below, I’m going with above.”    

Those lenders Schuh is betting against include Josh Zegen, who said that short-term rates less than three years (SOFR and Treasurys) will be below 4 percent; Affinus Capital’s Michael Lavipour; and Wells Fargo’s A.J. Sfarra, who said they’ll be “below, but not much lower than today, in my opinion.” 

The high rollers betting on above 4 percent include Bank of America’s Maria Barry, Thorofare Capital’s David Perlman and Kennedy Wilson’s Thomas Whitesell. 

PGIM’s Bryan McDonnell believes rates are already at their steady state, but “we should expect it to be a bit more volatile around the mean than in the past,” he cautioned.  Meanwhile, SMBC’s Alex Cabria used the age-old human tarot card in determining his prediction. 

“No crystal ball here, but I am going to just put my finger in the air and say ‘below,’ ” he said. 

Luck be a lady.