Between September 2019 and July 2022 the European Central Bank's deposit rate stood at minus 0.50%. Property loans written in that window, on the three-, five- and seven-year terms common in commercial lending, are the ones falling due now: DWS, in its Europe Real Estate Debt Strategic Outlook of May 2026, expects a significant volume of loans originated in the ultra-low-rate period to keep maturing through 2026 and 2027, often against rebased asset values. Then the rate path turned. On 11 June 2026 the ECB raised its three key rates by 25 basis points, and on 10 September it did so again, taking the deposit rate to 2.50% from 16 September, with the Middle East conflict cited as the source of the inflation pressure. According to the same September statement, bank lending rates for firms rose to 3.8% in June and July, from 3.6% in May. Here is why a maturity in this market is harder than it looks, where the shortfall comes from, and who ends up filling it.
The old loan is repaid by a new one
A maturing property loan is rarely paid off from the owner's pocket. It's repaid with the proceeds of a new loan, and the new lender has no obligation to the old terms. It values the property afresh, applies its own loan-to-value ceiling (the most it will lend as a share of that value), and tests whether the rent covers interest at today's rates. The refinancing gap is whatever is left between the old balance and the new advance.
A worked illustration shows how fast it opens; the figures are hypothetical, not a Watson file. Take a building valued at EUR 10'000'000 in 2021 and financed at 65% loan-to-value, a loan of EUR 6'500'000. Five years on, the valuer puts it at EUR 8'800'000, and the new bank caps senior lending at 60%. The new loan is EUR 5'280'000, which leaves EUR 1'220'000 of the old balance with nowhere to go. Rates press on the same file from the other side: on EUR 6'500'000, interest at 2% a year costs EUR 130'000, and at 4% it costs EUR 260'000, from the same rent roll. Neither number says anything about whether the building is any good. Both decide whether the refinancing closes.
Sixty per cent is a realistic ceiling for the illustration. DWS describes senior loans as typically constrained to 55% to 60% loan-to-value, and puts margins on prime residential lending at around 1.3% for 55% loan-to-value structures. Deloitte's EMEA Marketbeat for Q2 2026 reports that refinancing remained the primary financing purpose across Europe that quarter, with banks well positioned for conventional, lower-leverage transactions and alternative lenders relevant where borrowers needed more leverage or a bespoke structure.
The size of the gap depends on where the line is drawn
Every published estimate of the shortfall rests on an assumption about that ceiling, which is why the figures differ. AEW's research of October 2024 put the European debt funding gap at EUR 86bn for 2025 to 2027, modelling each loan vintage and treating a loan as unable to refinance if its loan-to-value at refinancing would exceed 75%. Offices made up 44% of that gap, retail 21% and residential 20%; by country, Germany led with EUR 31bn, 19% of its 2016 to 2023 originations. Empira's study of March 2025 measured something else, the volume coming due, and put European commercial property loans maturing in 2026 at around EUR 185bn. Neither study was written with this year's two rate rises in view.
Read together, the sources describe a market that has capital and is choosing where to put it. DWS writes that it doesn't expect a systemic shortage of debt capital, and in the same passage that banks may remain active but selective, focused on prime assets, preferred sectors and strong sponsors. It adds that loan extensions are no longer automatic. For a borrower whose file sits inside the bank's preferences, the maturity is a repricing. For one whose asset is secondary, transitional or simply outside a bank's current sector list, the maturity is a capital question, and it arrives on a fixed date.
The space between the bank's ceiling and the old balance
The United Kingdom, where lending data is published in more detail than on the Continent, shows where that space has been going. Bayes Business School's commercial real estate lending report, published in May 2026, found that new UK lending rose 29% in 2025 to GBP 52.7bn, the highest in a decade, and that around 60% of it involved refinancing. Over the same year, debt funds grew their share from 12% to 28%, UK banks' share fell from 40% to 36%, and alternative lenders, insurers included, now hold 45% of outstanding UK commercial real estate loans.
Our read is that the refinancing market is sorting itself into two kinds of file. The first is the conventional one, a stabilised asset at moderate leverage, which banks will go on rolling at tight margins. The second is the file whose new bank offer falls short of the old balance by a margin the owner can't cover from equity. That second file can still be sound: the building may be let, the owner experienced, and the shortfall nothing more than arithmetic produced by a valuation and a rate. What it needs is a structure built around the security and a credible exit, with capital that prices the higher leverage deliberately, before the maturity date forces a sale.
Where Watson AM fits
Refinancing is already in our published book. In Herlev, Greater Copenhagen, a property owner with a maturing loan needed long-term terms, and we structured a 20-year facility of CHF 2'820'000 at a loan-to-value of 67.6%, with a term sheet within a month (the full anatomy of the Danish refinancing is in the Casebook). In Norway, a family of hotel operators needed part of an existing portfolio refinanced while they bought new properties, and a single CHF 34'200'000 facility across Oslo and Bergen covered both, at a loan-to-value of 34.5%, with the term sheet issued within 31 days. Both files carry a first-rank mortgage in the investors' favour and a personal guarantee.
Our published deal box runs from EUR 1M to EUR 50M+, at a loan-to-value of up to 75%, the same line AEW draws in its model. We assess the property, structure the facility and prepare the file, then present it to investors in our network, each of whom reads the file and decides for themselves; the security is registered as a condition of their funding. A borrower facing a maturity can find the criteria on our borrowers page, and a maturity is easier to structure around while it is still some months away. Investor and borrower material is available on request.
Common questions
What is a refinancing gap in property lending?
It's the difference between the balance of a maturing loan and the amount a new lender will advance against the same property today. If the property's value has fallen, or the new lender's loan-to-value ceiling is lower than the old one, the new loan comes out smaller than the old balance, and the borrower has to fill the difference with equity, more junior capital, or a sale.
Why are 2026 and 2027 property loan maturities harder to refinance?
Many of them were written between September 2019 and July 2022, when the ECB's deposit rate stood at minus 0.50% and valuations were higher. DWS (May 2026) expects a significant volume of those loans to keep maturing through 2026 and 2027 against rebased asset values, and the ECB raised its key rates by 25 basis points in June and again in September 2026, taking the deposit rate to 2.50%.
How large is Europe's property debt funding gap?
Estimates differ by method and window. AEW (October 2024) put the European debt funding gap at EUR 86bn for 2025 to 2027, treating a loan as unable to refinance if its loan-to-value at refinancing would exceed 75%; offices made up 44% of that figure and Germany EUR 31bn. Empira (March 2025) put European commercial real estate loans maturing in 2026 at around EUR 185bn.
What happens if a property loan can't be refinanced at maturity?
The usual routes are an extension agreed with the existing lender, fresh equity from the owner, a new structure from a different source of capital, or a sale. DWS (May 2026) notes that extensions are no longer automatic and that stressed legacy loans face rising extension or selective sale risk, particularly in weaker office and retail assets.
Watson AM, Basel. This article is general market commentary for professional and qualified investors and for real-estate developers. It isn't investment, legal, or tax advice, or an offer of any financial product.
Sources
- European Central Bank, Monetary policy decisions, 10 September 2026 (deposit facility rate raised to 2.50% from 16 September 2026; bank lending rates for firms at 3.8% in June and July 2026): ecb.europa.eu.
- European Central Bank, Monetary policy decisions, 11 June 2026 (key rates raised by 25 basis points, deposit facility rate 2.25%): ecb.europa.eu.
- European Central Bank, Key ECB interest rates (deposit facility rate history, including minus 0.50% from 18 September 2019 to 27 July 2022), accessed October 2026: ecb.europa.eu.
- DWS, Europe Real Estate Debt Strategic Outlook, May 2026: dws.com.
- Deloitte, Real Estate Debt & Capital Advisory, EMEA Marketbeat Q2-2026: deloitte.com.
- AEW, Is the Worst of the Refinancing Challenge Behind Us?, October 2024: aew.com.
- Property Forum, Loan financing gap in European real estate close to EUR 90 billion (reporting Empira Group research), 20 March 2025: property-forum.eu.
- Bayes Business School, City St George's, University of London, UK Commercial Real Estate Lending Report, May 2026, as reported by Mortgage Solutions, New commercial real estate lending rises to highest in a decade, 7 May 2026: mortgagesolutions.co.uk.
- Watson AM deal record, case files 1 and 4 of the published deal book (anonymised).