At their latest meeting on September 17, 2025, the Federal Reserve announced a long-awaited rate cut – the first since December 2024. The decision reflects cooling inflation pressures and signals a potential pivot toward a more accommodative monetary policy stance.
For real estate investors, this is more than a headline; it’s a shift that can directly impact borrowing costs, asset values, and financing strategies.
Why This Matters
The Fed’s decision lowers the overall cost of borrowing. But more importantly for real estate investors, it can reshape the economics of acquisition, development, and refinancing.
Here’s what to watch for:
- DSCR Loan Rates May Dip: Most DSCR loans are tied to the 5- or 10-year U.S. Treasury yield plus a spread. Treasury yields often decline in anticipation of Fed cuts, which can pull DSCR rates down with them.
- Potential for Refinancing and Portfolio Restructuring: Investors can refinance existing debt at lower rates or tap equity for new deals, strengthening overall returns.
- Impact on Property Values and Demand: Lower financing costs can draw more buyers and investors into the market, pushing property prices higher and compressing cap rates.
What Could Happen Next
A rate cut often fuels increased activity. More investors re-enter the market. More competition emerges for deals. And asset prices can begin to rise again as capital becomes more accessible.
While that may sound like a boom, timing is everything. The most strategic investors act before momentum fully returns. That’s when spreads are still wide and sellers are still flexible.
What Real Estate Investors Should Do
- Review your floating-rate debt: This could be an opportune time to refinance into longer-term fixed-rate DSCR loans.
- Look at previously marginal deals: Projects that didn’t pencil before may make sense now.
Dominion Financial is already seeing investor activity pick up. We’re here to accentuate your momentum with fast draw schedules and flexible terms that help you capitalize on today’s shift.
INVESTOR TAKEAWAYS
When the Fed cuts rates, the overall cost of borrowing typically decreases. For real estate investors, this can mean lower mortgage and loan rates, improved cash flow, and stronger financing opportunities for acquisitions, refinancing, or development projects.
DSCR loans are usually priced against the 5- or 10-year U.S. Treasury yield plus a lender spread. When the Fed cuts rates, Treasury yields often decline, which can lead to lower DSCR loan rates and more favorable financing terms for investors.
Falling rates reduce borrowing costs, which increases buyer demand and competition. This often drives property values higher and compresses cap rates, especially in competitive markets. Investors who act early in a rate-cut cycle may benefit before prices fully adjust.
Rate cuts can make it advantageous to refinance floating-rate or high-interest debt into longer-term fixed-rate loans. Investors may also use refinancing to tap equity for new acquisitions, strengthening portfolio returns while lowering overall debt service.
Most DSCR loans are tied to Treasury benchmarks rather than the Fed funds rate directly. The 5- and 10-year Treasury yields serve as the base index, with lenders adding a spread. When Treasuries move down in response to rate cuts, DSCR loan pricing typically follows.
