The Fed Raised Rates. The 10-Year Treasury Matters More for Your Building.
On September 16, 2026, the Federal Reserve raised the federal funds rate by 25 basis points (0.25%) to a target range of 3.75% to 4.00%, its first hike since 2023. For multifamily owners in the South Bay, Peninsula and Alameda County, the bigger number is the 10-year Treasury yield, which closed near 5.00% that day. Most fixed-rate apartment loans price off that yield, so it drives what you'll pay when your loan resets or comes due.
Key takeaways
- The Fed's own projections point to one more 25-basis-point hike before the end of 2026. Twelve of 18 officials expect one more, four expect two, and two expect a hold.
- Floating-rate debt tied to SOFR (the Secured Overnight Financing Rate), such as bridge and construction loans, costs more almost immediately.
- Fixed-rate 5-, 7- and 10-year loans follow the 10-year Treasury more than the Fed rate, and that yield sits near 5%.
- Owners refinancing loans originated around 2021 face higher debt service, smaller loan proceeds and, in some cases, a cash-in refinance.
- Energy prices and the next round of inflation data will decide whether a December hike happens.
What did the Fed decide in September 2026?
The Federal Open Market Committee (FOMC) voted unanimously to raise its target range to 3.75% to 4.00%. Markets had priced the move in by the time it came, but the summer data swung hard in both directions. A weak July jobs report and soft August inflation readings pushed the odds of a hike below 50%. Then August payrolls came in at 162,000 against forecasts near 55,000, and the odds jumped back to roughly 59% in a single morning.
The Fed's updated projections set the median year-end rate at 4.1%, which implies one more hike. Officials now project core PCE inflation (the Fed's preferred inflation gauge, excluding food and energy) at 3.4% by year-end, up from 3.3% in June. Chair Kevin Warsh told reporters that "this summer's inflation readings do not tell me that underlying trends have meaningfully improved."
Why the 10-year Treasury matters more than the Fed rate
The Fed sets a short-term rate. Lenders price most permanent multifamily loans, including agency and bank loans with 5-, 7- or 10-year fixed terms, as a spread over longer Treasury yields. A 25-basis-point Fed hike does not add 25 basis points to your fixed-rate quote.
Bond investors sent a clearer message than stock investors on decision day. The 2-year Treasury rose to about 4.73% and the 10-year finished near 5.00%. That level puts pressure on any refinance model built when rates sat far lower.
If you carry floating-rate debt, the math changes faster. Bridge loans, construction loans and lines of credit tied to SOFR reprice within weeks, so your monthly payment rises with the Fed.
What this means for owners refinancing in 2026
Many owners in our markets locked in 5-year fixed loans in 2021, when rates sat near historic lows. Those loans reset or mature this year. If that describes your building, expect three things from a lender:
- Higher debt service. Your new rate will likely run well above your current one.
- Lower loan proceeds. Lenders size loans on DSCR (debt service coverage ratio, your net operating income divided by your annual loan payments). A higher rate means a higher payment, so the same income supports a smaller loan.
- Possible equity requirements. If the new loan can't cover the old balance, you'll need to bring cash to closing or look at other options.
Run your numbers six to twelve months before your reset date. That window gives you time to compare lenders, consider a loan modification or weigh a sale before a deadline forces the decision.
What this means by region
South Bay
San Jose owners of pre-1979 buildings operate under the city's Apartment Rent Ordinance, which limits annual rent increases. When rent growth has a ceiling and borrowing costs rise, your net operating income has less room to absorb a higher payment. Check how much of your income growth comes from turnover versus annual increases before you size a new loan.
Peninsula
Peninsula buildings tend to trade at lower cap rates (a property's net operating income divided by its price) than the rest of our markets. With the 10-year near 5%, many of those buildings now carry cap rates below the cost of debt, which leaves leveraged buyers with thin or negative cash flow at purchase. Mountain View and East Palo Alto owners also work under local rent stabilization, which limits how fast income can catch up.
Alameda County
Oakland, Berkeley, Hayward and Alameda each enforce their own rent rules on top of state law. Owners there tend to see higher cap rates than on the Peninsula, which gives buyers more room under today's borrowing costs. If you own a small building in Hayward or San Leandro with a loan coming due, that buyer depth matters if you're weighing a sale against a cash-in refinance.
Will the Fed raise rates again in 2026?
The Fed's own projections say yes, once more. Energy prices tied to the conflict involving Iran add a second source of inflation pressure, and the Fed flagged geopolitical uncertainty in its statement. If energy stays high through the fall, a December hike gets harder to rule out. One hike on its own may not move multifamily values much. A series of hikes, with the 10-year holding near 5%, would.
Frequently asked questions
Does a Fed rate hike raise my fixed-rate apartment loan?
Not directly. Most fixed-rate multifamily loans price off the 10-year Treasury yield plus a lender spread, so a 25-basis-point Fed hike does not translate into a 25-basis-point increase. The 10-year sat near 5% after the September 2026 decision, and that level drives today's fixed-rate quotes.
Should I refinance my multifamily property now or wait?
That depends on your reset date, your current DSCR and how much equity you hold. If your loan resets in the next year, start getting lender quotes now so a deadline doesn't force your hand. Waiting for lower rates carries risk, since the Fed projects at least one more hike in 2026.
How much does a higher interest rate reduce my refinance proceeds?
Lenders size loans so your net operating income covers the annual payment by a set ratio. A higher rate raises the payment, so the same income supports a smaller loan. Owners refinancing loans from 2021 may find the new loan doesn't cover the old balance.
Are South Bay and Alameda County multifamily values dropping because of the rate hike?
One 25-basis-point hike rarely moves values much by itself. Sustained 10-year yields near 5% put more pressure on pricing, because buyers' borrowing costs set what they can pay. If the Fed hikes again and yields hold, expect buyers to push harder on price.
What happens to my bridge or construction loan when the Fed raises rates?
Loans tied to SOFR reprice quickly after a Fed move, often within a month. Your interest payment rises with the new rate. If you hold floating-rate debt, check whether your loan has a rate cap and when it expires.
What to do if your loan comes due soon
The Fed hike made the headlines, but the 10-year Treasury will decide your next loan. If you have a reset or maturity coming in the next 12 to 24 months, talk to your lender early, and get a current valuation so you know whether a refinance, a sale or a 1031 exchange makes the most sense for your building. [Internal link: Request a valuation]
This post is for general information and doesn't constitute legal, tax or financial advice. Talk to your attorney, CPA or lender about how this applies to your property.
