How did construction loan rates change in October 2026?

The quick read: In October 2026 the two indexes that floating-rate construction loans reset on barely moved: the Bank Prime Loan Rate held at 7.00 percent from September 30 through its latest posted print, October 27, and SOFR rose 0.05 percentage point, from 3.90 percent on September 30 to 3.95 percent on October 30, according to FRED. On October 28 the FOMC held the federal funds target range at 3-3/4 to 4 percent. For a loan in its draw period, prime-based carry was unchanged and SOFR-based carry rose by about $42 a month for every $1 million drawn.

This is the construction-only record for October 2026. The stable guide to how construction loans are priced, and how an interest reserve is built, is construction loan rates; this page records what the indexes did during the month and what that means for a reserve already sized at closing.

Prime and SOFR in October 2026, by lender type

Floating-rate commercial construction loans in October 2026 split into two camps, prime-based and SOFR-based, and the camps had different months: prime did not move at all, while SOFR finished 0.05 point higher. The table prints each level from its FRED series page with the observation date, so a borrower can check the reset their own note uses.

Table: October 2026 index tape for floating-rate construction loans, by lender type (levels from FRED, read November 2, 2026)

The dated levels, as claim lines:

• Prime, September 30, 2026: 7.00 percent, per FRED series DPRIME.
• Prime, October 27, 2026: 7.00 percent, per FRED series DPRIME (the latest observation posted when this record was compiled).
• SOFR, September 30, 2026: 3.90 percent, per FRED series SOFR.
• SOFR, October 30, 2026: 3.95 percent, per FRED series SOFR.
• Federal funds target range, October 28, 2026: 3-3/4 to 4 percent, held, per the FOMC statement.

SOFR's month was not a straight line. According to FRED, it printed 3.87 percent on several October days, including October 1, 8, 9 and 19, then firmed from October 23: 3.92 percent that day, 3.95 percent on October 27, 3.94 percent on October 28 and 29, and 3.95 percent on October 30. A SOFR loan that resets on a monthly average absorbed less of that late move than one that resets on a single month-end print.

Prime is a posted rate, not a market rate. FRED's note for DPRIME describes it as the rate posted by a majority of the top 25 insured U.S.-chartered commercial banks and says prime is one of several base rates banks use to price short-term business loans. It changes in steps, which is why a prime-based construction loan either reprices or it does not.

When does a prime- or SOFR-based construction loan reset?

A floating-rate construction loan resets when its promissory note says it does, and the two index camps usually reset on different clocks: prime-based notes commonly reprice when the posted prime rate changes, while SOFR-based notes commonly reset monthly from a SOFR reading taken a few business days before the payment date.

The note is the only authority, so read three things in it. First, the index definition: prime as published, a daily SOFR compounded or averaged over the interest period, or a forward-looking term SOFR. Second, the lookback or determination date, which sets which day's reading counts. Third, any floor, which stops the all-in rate from falling below a fixed level even when the index does.

The spread over the index is set at closing and does not move with the tape. Lenders price it from leverage, sponsor experience, pre-leasing or pre-sales, and the completion risk of the build, and it stays fixed for the term unless the note steps it up at an extension. That is why an index month like October changes carry only through the index line.

SOFR-based construction loans from debt funds often require a rate cap, which pays the borrower when SOFR rises above a strike. A 0.05-point move is far from most strikes, so in October the cap mattered less than the reserve. Prime-based bank loans rarely carry a cap; their protection is the reserve and the borrower's own liquidity.

Why an interest reserve sized at the old index can run short

An interest reserve is sized at closing from the index level on that day, the spread, and a projected draw curve, so any later rise in the index, any slower draw-down than planned, or any delay to completion spends the reserve faster than the closing model assumed and can leave a gap at the end of the build.

The full mechanics, including how lenders size the reserve and fund it from loan proceeds, live in the construction loan rates guide. The point for October is narrower. A prime-based loan closed at a 7.00 percent prime saw no change in its reserve math this month. A SOFR-based loan closed when SOFR printed 3.90 percent now accrues interest on a slightly higher base.

The index effect compounds with the draw curve. Interest accrues only on drawn dollars, so early in a build the dollar effect of a small index move is tiny. Late in the build, when most of the loan is out and the reserve is nearly spent, the same move costs the most, at exactly the point where the reserve has the least room left.

Schedule risk usually outweighs index risk. A two-month delay to certificate of occupancy adds two full months of interest on a nearly fully drawn balance, which dwarfs a 0.05-point index move. The draw schedule guide covers how inspections and lien waivers set the pace of each draw.

Illustrative draw-period example: what 0.05 point costs

This illustrative example is our arithmetic, not a quote or a lender's terms: a $10 million floating-rate construction loan drawn evenly over 18 months, with interest charged on the month-end drawn balance, and the index 0.05 point higher than the level used to size the reserve at closing, which is the size of SOFR's September-to-October move.

Table: Illustrative extra interest from a 0.05-point index rise on a $10 million loan drawn evenly over 18 months

The total is small next to a reserve on a $10 million loan, and that is the honest reading of October: SOFR's move nicked SOFR-based reserves without threatening them. The same arithmetic scales in a straight line. A 0.25-point gap between the sizing index and the actual index would cost about $19,792 over the same draw period, five times the October figure.

The arithmetic above holds the spread fixed and ignores fees, floors and caps. If the loan has a floor above the current index, an index move below the floor changes nothing; if it has a cap, the cap pays only above its strike.

What did the October 28 Fed decision change for construction carry?

The FOMC's October 28, 2026 decision changed nothing mechanical for construction carry, because the statement's first sentence held the target range: "The Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent, in support of the Federal Reserve's dual mandate," as published by the Federal Reserve.

Banks in practice move the posted prime rate when the federal funds target moves, so a hold gave prime-based loans no reset trigger, and FRED shows prime unchanged through October 27. The target range's upper limit, FRED series DFEDTARU, read 4.00 percent every day from September 30 through November 2.

SOFR is a market rate on overnight Treasury repurchase agreements, and it moves inside and around the target range from day to day. Its 0.05-point rise over October came late in the month, from October 23 onward, not on the meeting day. For the broader read across loan types, see what the October 2026 Fed decision did to commercial real estate loan rates.

What to check before your next draw

Before the next draw request, a construction borrower should compare four numbers: the index level used to size the reserve at closing, the index level on the note's current determination date, the reserve balance left, and the interest projected on the remaining draws through completion and stabilization.

If the reserve still covers the projected interest with room for a delay, October needs no action. If it does not, the conversation with the lender is better held now, while the gap is small, than at the last draw. Options include a reserve rebalance from contingency, an equity top-up, or a revised draw schedule, and each needs the lender's consent.

Multifamily builds carry an extra layer, because lease-up runs after completion and the reserve often has to cover interest until occupancy supports the debt. The multifamily construction loans guide covers that bridge from completion to stabilization.

Will your construction loan's interest reserve still cover the build?

Whether your construction loan's interest reserve still covers the build depends on the index it resets on, the level it was sized at, and how much of the loan is still to draw, and the cleanest test is to put the deal in front of lenders that size reserves to today's index and compare their terms side by side.

YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors. The software matches a deal against 20,000+ loan programs, typically returning 5–8 matches, and the median first offer arrives in under an hour, from an institutional lender. Brokers then structure the request, negotiate the spread, reserve and floor for the borrower, and carry the loan toward closing.

It takes a 5-minute submit to start, with Zero upfront. The broker fee is 0.50–1.00% of the loan amount, paid only at closing. Prime-based and SOFR-based terms can then be weighed side by side, so you can see which reserve is sized to the current tape before you commit. Get construction offers compared. For the loan product itself, see construction loans.

The bottom line

October 2026 was a quiet month for construction carry. Prime held at 7.00 percent through its October 27 print, SOFR rose 0.05 point to 3.95 percent on October 30, and the FOMC held the target range at 3-3/4 to 4 percent on October 28. Prime-based reserves are unchanged; SOFR-based reserves are spending slightly faster, by about $42 a month per $1 million drawn. Schedule slippage, not the index, remains the bigger threat to a reserve.