Fed Pause at 4.75 %: What the Latest FOMC Decision Means for DSCR and Bridge Rates
Your fast-track guide to locking, floating, or repricing deals after the May 2025 meeting.
1 | The 30-Second Recap
On May 7, 2025 the Federal Open Market Committee kept the federal-funds target at 4.50 – 5.00 % (effective ≈ 4.75 %) for the third consecutive meeting. Why the stand-still?
-
Sticky Core CPI 2.9 % – Services and shelter inflation refuse to budge.
-
Labor Still Tight – Unemployment at 4.0 % leaves the Fed little room to ease.
-
Bank-Funding Stability – March stress in regional banks faded; no emergency cuts required.
Translation for real-estate investors: short-term indexes (SOFR, Prime) stay flat, while long-term Treasury yields hover just under 4 %. Spreads, not the Fed, will dictate your final coupon.
2 | Instant Impact on DSCR & Bridge Pricing
|
Component |
Pre-FOMC (Apr 2025) |
Post-FOMC (May 28 Close) |
Δ |
|---|---|---|---|
|
10-yr Treasury |
3.96 % |
4.43 % |
–47 bp |
|
5-yr SOFR Swap |
4.11 % |
4.05 % |
–6 bp |
|
Avg DSCR Spread* |
275 bp |
278 bp |
+3 bp |
|
Avg Bridge Spread |
625 bp |
620 bp |
–5 bp |
*30-yr fixed DSCR, 1–4 units, DSCR ≥ 1.20, LTV ≤ 75 %, FICO 700+
Takeaway: Index drift down, DSCR spread wobble up → net flat rates. Bridge lenders shaved a hair off risk premium.
3 | Why DSCR Loans React Differently Than Traditional Mortgages
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Spreads Move Daily – Private-credit desks reset risk margins based on bond-buyer appetite, not Fed dots.
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Property Cash Flow Sets the Floor – Lenders ensure DSCR ≥ 1.15 at the note rate, so a drop in index is moot if NOI is tight.
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Fee vs. Rate Trade-Off – Some shops hold the coupon but add lender credits. Watch the APR, not just the note.
4 | Lock-or-Float Decision Matrix (Next 60 Days)
|
Scenario |
Close Timeline |
DSCR Buffer |
Our Advice |
|---|---|---|---|
|
SFH rental purchase @ 80 % LTV |
≤ 30 days |
DSCR 1.18 |
Lock now – one 15 bp spread pop could sink approval. |
|
Portfolio refi @ 68 % LTV |
45–60 days |
DSCR 1.35 |
Float w/ 0.25 % float-down – strong buffer, gamble on summer rally. |
|
Bridge exit to perm DSCR |
90 days |
Pro-forma DSCR 1.30 |
Staged lock – cap index today; final lock after NOI seasoning. |
|
Fix-and-flip bridge purchase |
≤ 10 days |
N/A |
Index-plus pricing – closing speed > 25 bp savings. |
Rule of thumb: If your DSCR falls below 1.20 with a 25 bp increase, lock.
5 | Bridge Loan Nuances Under a Fed Pause
-
Floating-Rate Lines Calm ↓ – SOFR futures price < 4 % through Q4; many bridge lenders trimmed spreads 5 bp.
-
Interest-Reserve Sizing Stable – Underwriters still model exit rates at +150 bp; budget remains 9–10 months of carry.
-
Extension Fees Matter – Flat policy means no “cut windfall.” Avoid deals that need a rate drop to pencil.
6 | What Brokers Should Tell Clients—Today
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Start With DSCR, Not Index. A 10-bp index dip is useless if property taxes jump and DSCR dies.
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Order Appraisals Now. Low-volatility windows keep cap-rate comps favorable; election noise could widen spreads by fall.
-
Bundle Multifamily Blanket Refis Before Q3. CMBS desks historically pad spreads 20–40 bp in election quarters.
-
Pitch 5/1 ARM + Cap for Flippers-Turned-Landlords. Currently 40 bp under the fixed and cheaper to exit within 5 yrs.
7 | LoanFunders.com Rate Sheet (Updated 10 May 2025)
|
Product |
Rate Range |
Points |
Close Speed |
|---|---|---|---|
|
DSCR 30-yr Fixed |
7.35–8.05 % |
1–2 |
10–12 biz days |
|
5/1 DSCR ARM (2 % cap) |
6.85–7.25 % |
1.5 |
8–10 biz days |
|
Bridge–Fix & Flip |
10.25–11.25 % |
2 |
7 biz days |
|
Bridge–Ground-Up 1–4 |
10.75–11.50 % |
2.5 |
10 biz days |
(Tier-1 borrowers, FICO 700+, proper docs.)
Brokers: White-label any program and keep the client relationship — we handle underwriting.
8 | Action Checklist
|
Task |
When |
Benefit |
|---|---|---|
|
Screenshot liquid reserves |
Before lock |
Speeds condition clearance |
|
Build 3 × DSCR sensitivity table (+/–50 bp) |
Today |
Know your lock trigger |
|
Ask for float-down option quote |
If closing >30 days |
Capture rallies w/out risk |
|
Pre-clear title & insurance quotes |
File submission |
Avoid last-minute DSCR hits |
9 | Final Word
A Fed pause isn’t a free-fall in rates, but it locks in predictability. In a tight inventory market that’s priceless. Nail your DSCR buffers, lock strategically, and let us deliver term sheets in 24 hours.
Ready to price your next rental or bridge deal?
Timing the market is tough—timing your rate lock shouldn’t be.