Three years ago, Bay Area property owners would have dismissed the idea of celebrating a 6 percent mortgage rate. But in early 2025, many are doing exactly that, driving a wave of refinancing that is quietly changing the local lending landscape.
The main reason: many apartment owners who locked in low fixed rates during the pandemic are now facing the end of those fixed periods. Their loans have converted to adjustable rates, which have risen above what they can secure with a new fixed-rate loan. Even with rates higher than just a few years ago, refinancing now often results in lower monthly payments and greater financial stability.
“You can trade your adjustable-rate loan that’s around six and a half percent and refinance to a loan with maybe five years fixed at a lower rate,” says Marc Lipsett, Director of Loan Production at Walker Realty Capital in San Francisco. “People want to lock in a lower rate, and we can do that for them.”
For first-time buyers and small investors, this trend offers a clear view of how the market is working right now – and why waiting for significantly lower rates may not be the best strategy.
How Apartment Loans Work in the Bay Area
Unlike the typical 30-year fixed mortgage used for single-family homes, most Bay Area apartment loans have a fixed period of five or seven years before converting to an adjustable rate tied to an index such as the prime rate or Treasury yields. Loans originated in 2019 or 2020 at rates near 3.5 or 4 percent are now adjusting upward, often to 6.5 percent or more.
At the same time, new fixed-rate loans are available in the high 5 percent range. This means that despite higher overall rates than during the pandemic era, refinancing can still lower payments for many owners. The result is increased refinancing activity as owners seek to avoid the unpredictability of adjustable rates.
Lipsett notes that clients are now pleased to secure rates just under 6 percent – a level that seemed high only a few years ago. “Historically, 5 percent was pretty good,” he says.
Buyers and Owners Have Adapted to Higher Rates
The refinancing surge is partly driven by changing expectations. When rates first rose from 3.5 to 5 percent, the increase felt dramatic, and many buyers hesitated. But after several years of rates staying between 5 and 7 percent, market participants have adjusted their outlook.
This new mindset is bringing buyers back into the market. Many who paused in 2022 and 2023, hoping for a return to pandemic-era rates, now see that those conditions are unlikely to return soon. Instead, they are moving forward with purchases, recognizing that today’s rates are the new normal.
What This Means for First-Time Buyers
For those considering a first investment property or small apartment building, the key takeaway is not to wait for rates to drop to 3 percent again. In fact, waiting could end up costing more. Bay Area property prices have stabilized and, in some cases, are climbing as demand returns. If rates drop in the future, higher property prices could erase any savings from a lower rate.
Instead, buyers should focus on what they can afford now. Carefully evaluate monthly payments, including property taxes, insurance, and HOA fees. If the numbers work – meaning the property cash flows or fits your budget – moving forward makes sense. There is always the option to refinance later if rates decrease.
Lenders are also showing renewed interest in working with buyers. After absorbing losses from rising Treasury rates, banks have recapitalized and are once again eager to issue loans. “Banks have recapitalized, and we are starting to see more interest in putting out money,” Lipsett says. “They’re definitely interested in lending.”
The Refinancing Opportunity May Be Temporary
For current apartment owners, the chance to refinance into a lower fixed rate will not last indefinitely. If Treasury rates rise again – a real possibility given ongoing federal deficits and debt levels – the cost of refinancing will increase.
Lipsett warns that the country’s need to finance large amounts of debt could push rates higher. Owners whose loans have recently adjusted to higher variable rates should act quickly to explore refinancing options. Securing a fixed rate in the high 5 percent range now could save thousands of dollars a year compared to staying with a variable rate that may climb further.
The Bottom Line
Bay Area apartment owners are refinancing now because they can lock in fixed rates lower than their current adjustable rates, even though rates are higher than a few years ago. For first-time buyers, the lesson is clear: do not wait for a return to pandemic-era rates. Focus on affordability, run the numbers, and move forward when the deal makes sense. As Lipsett puts it, “People have gotten used to these rates, and they’re ready to move forward.”
About the Expert: Marc Lipsett is Director of Loan Production at Walker Realty Capital in San Francisco, working with apartment owners and small investors throughout the Bay Area. He specializes in refinancing and acquisition financing for multifamily properties.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.
