On October 29, 2025, the Federal Reserve (Fed) lowered its target range for the Federal Funds Rate by 25 basis points (0.25%). This follows a similar cut in September, bringing the target range down to 3.75 to 4.00%. The current easing cycle directly contrasts with the swift rate hikes that occurred in 2022-2023, which were implemented to tame high inflation.
Now the focus is on a softening job market which has been amplified by a number of recent, high-profile layoffs announced by Amazon, Target, Microsoft, and UPS, just to name a few.
Like many other players within the housing industry, private lending companies, such as RBI Private Lending, are impacted by these rate changes.
In this blog we’ll explore:
Lower Funding Costs & Increased Competition
Now that the Fed has moved toward a cycle of reducing the Federal Funds Rate, some of the pressure that private lenders have experienced in recent years has begun to lift. A lower Federal Funds Rate generally causes three things to happen:
1. Borrowing Costs Decrease:
For many private lenders, especially those that depend on short-term credit lines or other types of wholesale funding (such as warehouse lines of credit), a lower Federal Funds Rate often translates to lower borrowing costs.
2. Lending Increases:
Less expensive capital allows private lenders to offer more competitive rates to consumers and businesses. This can potentially boost their loan origination volume.
3. Market Share Shifts:
In the mortgage marketplace, non-bank lenders (a significant component of private lending) tend to gain market share from traditional banks during periods of falling interest rates. When rates are low, banks typically have less of an incentive to compete aggressively.
Refinancing Risk
A lower Federal Funds Rate can also expose private lenders to an increased risk for refinancing – especially when it comes to corporate credit. Many private credit loans to businesses have floating interest rates that are tied to a benchmark, such as the Secured Overnight Financing Rate (SOFR), which is influenced by the Fed’s rate. When the Fed cuts rates, the interest income private credit funds earn from existing loans will then decrease.
At the same time, lower interest rates encourage corporate borrowers to refinance their existing debt. This can lead to a refinancing wave whereby older, higher-rate loans are prematurely repaid, forcing private lenders to reallocate the capital at lower current market rates.
Impact by Loan Type
The lending solutions private lenders provide can also feel the effects of lower rates – though not always in the same way as traditional loans.
● Fixed vs. Variable-Rate Loans:
Variable-rate consumer products, such as certain personal loans or credit cards, are tied to the Prime Rate (which moves with the Fed), and are typically the first to adjust. Rates on new fixed-rate loans may also decline as market benchmarks shift downward, while existing fixed-rate loans remain locked at their original terms.
● Private Real Estate Loans:
For real estate investors and developers, loan pricing is driven more by market fundamentals – such as local supply and demand, leverage, and asset quality – than by Fed policy. However, the ripple effects of lower rates, like improved housing affordability and stronger buyer demand, can indirectly increase activity and create more lending opportunities for private lenders.
Increased Investor Demand for Private Credit
A lower Federal Funds Rate doesn’t just influence borrowing – it also alters investor behavior. When yields on safer assets like U.S. Treasuries decline, those investments become less attractive. As a result, institutional investors such as pension funds and endowments often turn to higher-yielding alternatives like private credit funds.
This shift can drive stronger fundraising activity for private lenders, increasing the amount of capital available for new deals and fueling continued growth in the sector.
Ultimately, the Fed’s move to lower rates tends to create a more favorable environment for private lenders. Cheaper capital and heightened borrower demand can expand lending opportunities and origination volume, even as lower yields slightly compress returns on floating-rate assets.
For many private lenders, these dynamics underscore a broader opportunity: to leverage abundant capital and market momentum to grow their portfolios and deepen their role in today’s evolving credit landscape.
About RBI Private Lending
RBI Private Lending is an award-winning direct lender specializing in bridge, fix-and-flip, and ground-up construction financing. Since 2015, the company has managed over $1.2 billion in capital and expanded operations across 40+ states. Ranked by Scotsman Guide among the top private lenders in the United States for 2025, RBI is recognized for speed, transparency, and client satisfaction. Asset-based underwriting, bilingual service, and nationwide reach enable efficient funding and repeat borrower success across residential and commercial real estate investment portfolios.
For more information about private lending, RBI, and the products and services we offer, visit https://www.rbiprivatelending.com/.
