Private lending in the United States is increasingly influenced by rising interest rates and shifting risk appetites. Lenders now charge 8-12% for real estate loans, up from 5-7% in 2021, reflecting Federal Reserve rate hikes and tighter credit conditions.

The surge in rates stems from the Fed’s aggressive 2022-2023 tightening cycle to combat inflation, lifting the federal funds rate from 0-0.25% to 5.25-5.5%. This has increased borrowing costs for both banks and private lenders, who rely on short-term funding. Data from the Federal Reserve’s Senior Loan Officer Opinion Survey shows 75% of banks tightened lending standards for commercial real estate loans in Q3 2023, pushing private lenders to fill the gap. Meanwhile, the National Association of Realtors reported a 15% drop in home sales in Q2 2023, raising default risks and prompting lenders to demand higher yields. Private lenders also face elevated costs due to rising insurance and legal expenses, with average closing costs rising 20% year-over-year to $12,000 per loan (Federal Housing Finance Agency, 2023). These factors collectively drive the current rate range and signal a cautious lending environment.