Higher for longer: what current rates mean for family office debt

Higher for longer describes a rate environment in which policy rates stop falling well above the levels of the 2010s and the market stops pricing a quick return to them. As of October 2026 that is where both the US and the UK sit. The Federal Reserve raised its target range to 3.75% to 4% in September, the Bank of England held at 3.75% with a minority voting for a rise, and the overnight benchmarks that price most family office borrowing sit just below 4% in both currencies. For an office with debt, the cost of carry is now a permanent line in the budget rather than a rounding error.

Where the benchmarks stand

The Federal Open Market Committee raised the federal funds target range by a quarter point to 3.75% to 4% on 16 September 2026 by a 12 to 0 vote, stating that inflation remained elevated and that the move would support a timelier return to its 2% goal. The New York Fed's SOFR series printed 3.88% for 14 October 2026.

The Bank of England's Monetary Policy Committee held Bank Rate at 3.75% at its meeting ending 16 September 2026, with three of nine members voting for a rise to 4%. The minutes recorded CPI inflation of 3.1% in August, projected around 3.75% in the fourth quarter of 2026 and slightly above 4% in the first quarter of 2027, and judged risks to the inflation outlook tilted to the upside. The Bank Rate history shows the rate falling from 4.5% in February 2025 to 3.75% in December 2025 and then holding. SONIA averaged 3.7325% in October 2026 according to global-rates.com, which compiles the Bank's published fixings.

The practical point is that the easing cycle of 2025 has stopped in the UK and reversed in the US. An office that modelled its borrowing cost on a glide path back to 3% should rerun the numbers.

How family offices use leverage

Survey data suggests family offices are, on the whole, lightly geared. Citi's 2025 Global Family Office Survey of 346 offices found that 50% used no leverage, 25% kept it below 10% of assets, 10% were at 10% to 20%, 7% at 20% to 30% and about 8% above 30%. Interest rates ranked as a top concern for 30% of respondents and inflation for 37%.

UBS's 2026 Global Family Office Report, summarised by Caproasia, asked a broader question and found 65% of offices using leverage in some form: 31% through funds or vehicles that themselves borrow, 29% at the asset level, 25% at the portfolio level, 24% through margin loans or credit lines and 20% through collateralised borrowing. The two surveys are consistent once the definitions are lined up. Most of the leverage in a family office balance sheet sits inside funds and property vehicles rather than at the office itself, and the explicit borrowing is concentrated in a minority of offices.

That matters for higher for longer because fund-level and asset-level leverage reprices without the office doing anything. A buyout fund's portfolio companies, a property vehicle's mortgage and a private credit fund's own facility all carry floating rate debt, and the effect reaches the office through lower distributions rather than a higher interest bill. The distributions drought is partly a rates story.

Fixed versus floating

Most family office borrowing floats. Lombard lines price off money market rates, NAV facilities and subscription lines price off SOFR or SONIA plus a margin, and property debt is commonly floating with a hedge. Rede Partners' 2026 NAV Financing Report found margins converging around 4% to 7%, which on a SOFR base of 3.88% implies an all-in cost of roughly 8% to 11% before fees for that product.

Fixing is available for shorter tenors. UBS's Lombard factsheet offers a fixed advance for up to 24 months, with the rate set for the term, alongside a floating current account facility. Interest rate swaps and caps are the usual route for longer property or portfolio debt. The choice turns on how the office's income behaves. An office whose income is largely floating, from cash and private credit, has a natural hedge and can tolerate floating debt. An office whose income is fixed coupons, rent on long leases or irregular distributions is exposed and should consider fixing or capping a portion.

A second consideration is the asymmetry of outcomes. If rates fall, floating debt gets cheaper and the collateral tends to rise. If rates rise, floating debt gets dearer at the same time that private marks and distributions come under pressure. For a borrower whose collateral is a private portfolio, that correlation argues for conservative sizing more than for any particular rate structure. The articles on cash and fixed income and on Lombard versus NAV lending cover the asset and collateral sides of the same question.

Higher for longer does not make borrowing wrong. It raises the bar that a borrowed investment has to clear, and it rewards the office that knows its all-in cost, its reset dates and the point at which it would repay rather than roll.