The Fed Factor: What Borrowers Miss
Everyone’s buzzing about September’s Fed meeting. Borrowers are holding out, waiting on the Fed like it’s the Super Bowl halftime show. But let’s be clear: lenders don’t wait for the press release, they’re already playing the game.
Markets are forward-looking. Expected cuts? Already baked into pricing. The “upside” you think you’re waiting for? You already have access to it.
If you’re waiting on Powell’s press conference to make your move, you may already be late to the party.
Here’s what happens after the announcement:
Liquidity pulls back.
Demand spikes.
Spreads widen.
The same deal suddenly costs you more.
What’s a Spread, Really?
Let’s strip it down. A “spread” is the premium a lender tacks onto the benchmark interest rate (Treasury, SOFR, SWAP, etc.) to arrive at the final rate you’ll pay.
📊 Example: If the 10-year Treasury is sitting at 4.00% and a lender quotes you 6.00%, that’s a 200-basis-point spread.
That 2% isn’t random, it’s how lenders price in your risk, cover their operational costs, and build their profit margin. It’s the invisible layer between market rates and the deal on your desk.
And here’s the kicker: spreads are just as important,if not more important,than the Fed funds rate in determining your borrowing cost.
Why Spreads Move
Spreads aren’t static. They’re dynamic, shifting daily, sometimes hourly, based on forces that have nothing to do with Jerome Powell’s microphone. Here’s what drives them:
Macroeconomic Environment: Stability compresses spreads; volatility widens them. Recession fears = defensive pricing. Optimism = competition.
Credit Quality: Strong sponsors with stable cash flows? Tight spreads. Thin deals or shaky assets? Expect to pay more.
Liquidity & Competition: When lenders chase deals, spreads contract. When liquidity tightens, spreads widen.
Loan Structure: Construction, bridge, mezzanine, CMBS, all have different risk premiums baked in.
Regulatory Pressure: Shifts in capital requirements or risk-weighting can push spreads wider overnight.
Think of spreads as the heartbeat of the market. They pulse with lender appetite, investor sentiment, and overall confidence.
The window you had to secure lean spreads is closing.
It’s like showing up to the hottest new restaurant after the Michelin star hits, you’re not walking in, you’re waiting in line. And when the line forms, the menu gets pricier.
Why Timing the Spread Matters More Than Timing the Fed
Too many borrowers obsess over “locking at the bottom” of interest rates. But pros know the true cost of capital lives in the spreads.
A 25-basis-point Fed cut means less if spreads widen by 50 bps the next day.
Pro formas and IRRs with +100bps spread floating rate debt hit differently than +250bps.
Savvy borrowers don’t chase the Fed, they watch liquidity, lender appetite, and competitive pressure.
Three Moves to Make Right Now
So, what should you do while everyone else is waiting in line?
Shop Across Lenders
Life companies, banks, CMBS, debt funds, they each price risk differently. Don’t settle for one quote. Create competition. Let lenders sharpen their pencils and gain confidence that you are getting the best terms.Polish Your Profile
Lenders reward strong sponsors. That means tightening up your credit story, underwriting clean deals, and presenting the “story” correctly. You want to be the borrower lenders fight to finance.Act Before the Stampede
Right now, spreads are leaner because liquidity is strong. But once the Fed confirms the cut, the floodgates open. More borrowers rush in. Competition spikes. Spreads widen. The same deal suddenly costs you more.
Bottom Line: Don’t Wait for the Line Around the Block
The Fed cut will grab the headlines. But spreads are where the deals are won or lost.
You have a rare window today, before the Fed announcement, before the stampede, to lock in terms while lenders are still competing aggressively.
By the time the line forms and everyone’s fighting for the same capital, you’ll already be funded and focused on scaling, while others are still waiting in the lobby.
That’s what it means to play the game like a queen.
At CRECapitalQueen, I don’t just chase rates, I teach borrowers how to position deals, and navigate lender spreads with clarity. The best don’t wait for permission. They move when the window is wide open.
👑Borrow like royalty.
