How Do Interest Rates Affect Contractors in 2027?
Your client loved the plan. Then the bank quoted the loan, and the project went on hold.
Interest rates hit contractors twice: once through clients who can’t borrow, and again through your own truck loans and credit line. This page shows an owner how to plan for both.
Dr. Paul Borosky, Business Consultant, has walked 1,000+ owners through what borrowing really costs.
Talk to Dr. PaulCall or text (321) 948-9588.
Last Updated: November 2026
Real World Help From Dr. Paul
Construction Business Plan Template
A plan and a profit model built for contractors.
See the construction templateHow This Guide Works
Short on time? Doctor Owl’s answer and the box below are enough. Want the story? In Dr. Paul’s Fabled Forest Business School Series, Bella’s biggest client puts a job on hold because the loan got too expensive, and Bella realizes she’d already ordered the materials. The example sits after the trend.
- For every job in your pipeline, write down whether the client’s financing is approved.
- Add up what your truck, equipment, and credit line payments cost each month.
- Ask your lender what rate you’d pay to borrow more right now.
What Did Bella Learn From the Paused Job?
The raccoon family’s new store was ready to go. Bella had the crew lined up and the lumber on order. Then the raccoons’ bank came back with a higher rate, and they paused the job.
Doctor Owl asked, “Is this a fire, or a foundation?” The paused job was a fire. Knowing which jobs were really funded was the foundation. They used Dr. Paul’s Organize-Plan-Grow™ Strategy.
- Organize. Chuck went through the pipeline. Three of the five big jobs depended on loans that weren’t approved yet.
- Plan. Bella stopped ordering materials until the client’s financing was confirmed in writing. She asked for a deposit on every job.
- Grow. Each month, Chuck marks every job as funded or not funded. Only funded jobs go on the schedule.
The raccoons came back two months later with a different lender. This time, Bella waited for the approval letter.
What’s Happening With Rates?
The National Association of Home Builders reported in October 2026 that the average 30-year fixed mortgage rate had risen to 7.03% as of late September, its highest since January 2025. NAHB’s chief economist called the rise in long-term rates a warning signal for 2027.
The American Institute of Architects has also pointed to stubbornly high long-term interest rates as a drag on nonresidential building. Projects that depend on borrowing get delayed or shrink.
Source: National Association of Home Builders, Housing Headwinds Intensify Heading Into 2027 (October 2026).
How Do High Rates Shake Your Pipeline?
When rates stay high, some clients wait, some shrink their projects, and some walk away. Your pipeline can look full and still be shaky.
Your own borrowing costs more too. A new truck, a piece of equipment, or a bigger credit line costs more each month than it did a few years ago.
How Do You Plan Around High Rates?
- Ask about financing early. Before you order materials, know the client’s loan is approved.
- Take deposits. A deposit shows the client is committed and protects your cash.
- Know your debt payments. Add them up monthly. They’re fixed even when work is slow.
- Think twice before buying equipment. Renting or leasing can make more sense when rates are high.
- Keep a cash cushion. A delayed job shouldn’t mean a missed payroll.
What Does a Higher Rate Do to an Equipment Loan?
Illustration only. Round numbers, not a real company.
Say you borrow $60,000 for a piece of equipment. At a higher rate, the monthly payment can run noticeably more than it would have a few years ago, for the same machine. Over the life of the loan, that’s real money that could have gone to payroll or a cushion.
Weighing a big equipment purchase? The QBP lesson on buying, leasing, or renting equipment compares the options. Going to a lender? Read what lenders want from a construction company and build your numbers in the construction business plan template.
Want Help Planning Around Rates?
Bring your debt payments and pipeline to a free 15-minute call with Dr. Paul. You leave knowing where your borrowing risk sits, and what more help would cost if you want it.
Or call or text (321) 948-9588.
What Do Contractors Ask About Interest Rates?
Will rates come down in 2027?
Nobody knows for sure. Plan for rates staying high, and treat any drop as a bonus.
Should I pay off debt or keep cash?
It depends on the rate and your pipeline. Many contractors keep a cushion first, then pay down the costliest debt.
Can I ask a client for proof of financing?
Yes, many contractors do before ordering materials or scheduling a crew.
About the Author
Dr. Paul Borosky, DBA, MBA, helps contractors understand what borrowing really costs. He works with clients in all 50 states and Canada.
Sources
- National Association of Home Builders, Housing Headwinds Intensify Heading Into 2027 (October 2026).
- The American Institute of Architects, Consensus Construction Forecast (January 2026).