SOFR cap premiums for mid-sized real estate debt have fallen roughly 35% over the past year, making interest rate hedging materially cheaper for owners carrying floating-rate bridge debt. The decline reflects the market's view that rates have peaked.
For owners with $5–25M in bridge or construction debt, a 2-year cap at a 4.5% strike now runs 0.8–1.2% of notional — well below the 2024 cost of around 1.8%.
The strategy is most relevant for owners planning to refinance in 12–24 months, who want certainty on their interest carry until permanent debt is in place.