Rates & Debt Markets
European Real Estate Debt: Higher Rates, Strong Lender Appetite
Capital remains available across European real estate debt markets, but the cost of capital has moved higher again. September's ECB decision and the repricing of the EUR swap curve reinforce why financing structure, leverage and execution strategy matter as much as headline lender appetite.
Published 29 September 2026 · KSCG - Keystone Capital Group
Rates moved higher in September
On 10 September 2026, the European Central Bank raised its three key interest rates by 25 basis points. The deposit facility rate increased to 2.50%, the main refinancing operations rate to 2.65% and the marginal lending facility rate to 2.90%, effective from 16 September.
Market rates moved materially over the same period. BlueGamma's EURIBOR swap data show the 5-year EUR swap at approximately 3.18% on 28 August and 3.66% on 28 September 2026. That is an increase of roughly 48 basis points in one month.
For real estate borrowers, swap rates are an important component of fixed-rate and hedged debt pricing. A higher swap curve can therefore increase all-in borrowing costs even where lender margins themselves remain competitive.
Lender appetite has not disappeared
The higher rate environment does not mean debt availability has disappeared. CBRE's European Lender Intentions Survey 2026, based on 134 Europe-based respondents, found that 72% of lenders expected to increase origination activity during 2026, while only 7% expected a decline.
The same survey found that 69% of respondents were willing to underwrite development loans in 2026. That points to an important distinction for borrowers and sponsors: capital availability and capital pricing are separate questions.
What this means for real estate financing
In a market where benchmark rates can move faster than lender margins, the financing decision should not be reduced to the lowest quoted coupon. The interaction between interest rate exposure, leverage, amortisation, exit timing and lender flexibility can materially affect the resilience of a transaction.
- Fixed versus floating-rate exposure and the timing of hedging decisions.
- Leverage relative to sustainable cash flow and downside debt-service capacity.
- Bridge finance versus longer-term debt where the business plan is still transitional.
- Refinancing timing, particularly where maturities fall into a volatile rate environment.
- Lender selection based on structure, flexibility and execution certainty rather than headline pricing alone.
KSCG view
The current environment is not simply a story of scarce credit. European lenders continue to show appetite, but the all-in cost of debt is sensitive to the underlying rate curve and to transaction-specific risk.
For investors, developers and sponsors, this increases the value of testing the full financing structure before approaching the market: debt quantum, interest-rate exposure, covenant headroom, repayment strategy and lender fit should be assessed together.
Structure matters. Flexibility matters. Execution matters.
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