At first glance, the headlines don’t seem to add up—loan originations are down, yet commercial and multifamily mortgage debt is hitting new records. What’s going on here? I believe we’re looking at a market that’s recalibrating, not retreating. And that has real implications for investors, lenders, and policymakers alike.

Understanding the Rise in Mortgage Debt Despite Slower Lending in 2025

According to the Mortgage Bankers Association (MBA) report released in early 2025, commercial and multifamily mortgage debt in the U.S. hit a record $4.81 trillion by the end of Q1—up $46.8 billion (or 1%) from the previous quarter. Multifamily debt alone rose to $2.16 trillion, despite sluggish new loan originations. This suggests that while fewer new deals are being made, existing debt is holding—and even growing.

What This Signals: Key Takeaways from the Q1 2025 Data

The Market Is Being Propped Up by Long-Term Debt

One key driver of the growing debt load? Longer loan durations. Many investors are choosing to hold rather than refinance in today’s tighter credit environment. That extends the life of outstanding loans and keeps debt on the books—even without fresh origination.

It’s a bit like a traffic jam—if no one exits the highway, the lane stays full regardless of how few cars are entering.

Multifamily Still Looks Strong—Just Not in the Usual Ways

Even with high interest rates and cautious underwriting, multifamily debt rose $19.9 billion in Q1. The strong performance of banks (+$10B) and GSEs (+$7.5B) shows continued institutional confidence in rental housing. REITs jumped 10.9% in holdings—another bullish signal.

Traditional Institutions Still Dominate—But Risk Spreads Wider

Commercial banks and GSEs hold the bulk of this debt, but CMBS, CDOs, and other securities saw the largest dollar gain this quarter—up $16.2 billion. This reflects broader distribution of risk, which can support liquidity—but also complicates unwinding if stress emerges.

Some Players Are Pulling Back—And That’s Worth Watching

While REITs grew aggressively, private pension funds reduced exposure by 10.6% in commercial/multifamily debt and 12.7% in multifamily alone. That could reflect concern over volatility or liquidity needs—especially if rates stay higher for longer.

What Should Investors and Stakeholders Do Next?

For Multifamily Investors: Double Down on Asset Fundamentals

If you’re holding multifamily properties, make sure your assets are performing. Focus on cash flow, tenant retention, and operational efficiency. The debt markets may look stable, but access to new financing remains selective.

For Lenders: Evaluate Your Portfolio Duration and Mix

If you’re a mid-sized lender or credit union, now’s the time to reassess exposure across multifamily, CMBS, and GSE-related debt. Diversification across asset types and regions can help manage longer-term risk.

For Policy Makers: Track Shifting Capital Sources

The rise of non-bank debt holders like REITs and securitized products makes it harder to gauge systemic risk. Better visibility and stress testing across capital sources will be key in preventing instability.

Quick Explainer

What Are CMBS, CDOs, and ABS Issues?

These are financial securities backed by real estate loans (CMBS), corporate debt (CDOs), or other asset types (ABS). Investors buy slices of these pooled loans, which offer returns based on the Down payments—but also carry structured risk.

Reader Q&A

Should I be concerned about investing in multifamily now?

Not necessarily. Fundamentals remain strong, especially in high-demand rental markets. But be cautious about over-leveraging in an uncertain rate environment.

How does this debt growth affect affordability?

Rising debt levels can pressure property owners to raise rents—but also fuel new development if financing holds. It’s a balancing act that varies by market.

Are REITs a smart play now?

With their increased multifamily exposure, REITs could offer opportunity—just watch their interest rate sensitivity and geographic focus.

Final Thought

The $4.81 trillion mark isn’t necessarily a sign of overheating. In fact, it may reflect strategic debt management in a high-rate environment. But the pace and makeup of this growth deserve scrutiny. If capital continues shifting toward securitized or non-traditional channels, volatility could follow.

Platforms that offer real-time portfolio analysis or exposure modeling can give investors and lenders an edge here.