Higher rates and loan maturities add to refinancing pressure
Commercial mortgage delinquencies increased in the third quarter of 2026, raising concerns about how borrowers will manage upcoming loan maturities when refinancing costs remain high.
The latest Commercial Real Estate Finance (CREF) Loan Performance Survey from the Mortgage Bankers Association (MBA) found that more commercial mortgage balances fell behind on payments during the quarter, continuing a trend of rising commercial mortgage delinquencies earlier this year. However, delinquency rates remained low by historical standards across most financing sources.
The concern extends beyond loans already in trouble. Borrowers who are keeping up with payments may still struggle to refinance when their loans mature, particularly if higher interest rates and weaker property performance make it harder to secure new financing.
"Delinquency rates for commercial mortgage loans increased modestly in the third quarter. Challenging fundamentals, particularly in the multifamily and office markets, along with higher rates, are having an impact on performance,” MBA chief economist Mike Fratantoni said.
“However, delinquency rates remain historically low across most capital sources. The large number of scheduled maturities coming due amidst the recent spike in interest rates will continue to be a headwind for commercial mortgage performance in the quarters ahead.”
For loans originated when rates were lower, refinancing could mean higher payments or require borrowers to contribute more equity.
These pressures are not affecting all parts of the market equally. Commercial mortgage-backed securities (CMBS) continued to record the highest delinquency rates among major financing sources, with 4.97% of loan balances at least 30 days past due, up from 4.82% in the previous quarter.
The increase follows earlier signs of rising commercial mortgage delinquencies, with CMBS loans facing greater repayment stress than other financing sources.
Life insurance company mortgage portfolios recorded a delinquency rate of 1.33%, up from 1.19%, while government-sponsored enterprise (GSE) loans saw a smaller increase to 1.16% from 1.11%. Federal Housing Administration (FHA) loans were the exception, with their delinquency rate declining to 0.90% from 1.06%.
Delinquency rates also varied by property type, with office loans continuing to record the highest levels. MBA identified challenges in the multifamily market as another factor affecting loan performance.
Earlier CMBS delinquency data from Trepp also showed repayment stress across office and multifamily properties, with some borrowers struggling to refinance loans that had reached maturity. These conditions can complicate refinancing because weaker property income or lower valuations may reduce the amount lenders are willing to finance, even when borrowers have maintained their payments.
The Federal Reserve's May 2026 Financial Stability Report similarly identified refinancing difficulties as a potential source of distressed commercial property sales when borrowers cannot secure replacement financing.
Still, lending conditions are not tightening across the board. The Federal Reserve's July 2026 Senior Loan Officer Opinion Survey found that banks generally eased commercial real estate lending standards during the second quarter, although standards remained relatively tight by historical measures.
MBA's survey covered approximately $3 trillion in commercial and multifamily mortgage balances as of September 30, representing 59% of the estimated $5 trillion in outstanding debt at the end of the second quarter.
