Most credit stress does not begin with a missed payment. It begins with a phone call that sounds routine: a loan is coming due, and it needs a new rate.

For years, many borrowers lived in a world where refinancing felt like a win. You rolled debt forward and paid less. You extended maturities and freed up cash. That pattern shaped balance sheets across companies, property owners, and households.

Now the pattern is different. The refinancing cliff is the moment when old, cheap debt meets today’s higher-rate world. Nothing has to “break” for pressure to rise. The math changes first. Then behavior changes.

Credit booms often look safe while they are growing. The real test tends to come later, when debt must be renewed.

History has a repeat theme: stress clusters around maturity, not just around quality. A borrower can be “fine” at yesterday’s interest cost and still be fragile at today’s interest cost. That gap matters most when a lot of debt comes due around the same time.

That is why people talk about “maturity walls.” The idea is simple. If many loans mature in a tight window, the market has to re-price a big stack of debt at once. In easy times, that is just paperwork. In tighter times, it becomes a filter.

The cliff is not a single date. It is a sequence: a loan matures, new terms arrive, cash flow tightens, and choices narrow.

Today’s rate setting is not the one many borrowers built around. The Federal Reserve’s target range for the federal funds rate is 3.50% to 3.75% as of January 22, 2026. That range anchors short-term borrowing costs across the system.

When a borrower refinances, the key question is not “Can I pay?” It is “Can I pay at the new price?”

If interest expense rises, cash has to come from somewhere. That often shows up as slower hiring, delayed projects, or reduced flexibility. These moves can happen while defaults stay low. The pressure is real, but it is quiet.

Commercial real estate is a clear place to see this logic. S&P Global Market Intelligence has described a growing CRE maturity wall that peaks later in the decade, and Reuters has pointed to roughly $936 billion of CRE mortgages due in 2026, with office loans a meaningful share. The refinancing problem here is not only the rate. It is also the underwrite: new loans are based on current income and current values, not on the past cycle’s numbers.

Corporate credit has its own version. Moody’s has warned that an “advancing” maturity wall can raise risk if a shock hits while a lot of debt needs to be rolled. PitchBook, looking at the high-yield bond market, noted a large lump of maturities later in the decade, with more than $700 billion of bonds due over 2027–2029 (including a very large year in 2029). That does not mean trouble is certain. It does mean more borrowers will face the reset.

Households feel a related effect, even when they are not refinancing. The long fixed-rate mortgage locked in low rates for many owners. That stability has a cost: it can reduce moves. A Federal Reserve paper finds mortgage rate “lock-in” explains 44% of the drop in mortgage borrower mobility from 2021 to 2022. When fewer people move, markets can get tight and less responsive.

Across these areas, the story is the same. The system is adjusting to a new price of money, and that adjustment shows up first as friction.

The refinancing cliff does not produce one outcome. It produces a range.

In one path, growth and stable financing markets help borrowers absorb higher interest costs. Refinancing still hurts, but it is spread out over time. Extensions, partial paydowns, and slower spending can keep defaults contained, even as the economy loses some speed.

In another path, the same refinancing calendar meets weaker demand, wider spreads, or tighter lending standards. Then the reset becomes more abrupt. Stress can concentrate in places where cash flow is uncertain, assets are hard to sell, or lenders are already cautious. Commercial real estate can be vulnerable when rents lag and values are under pressure. Lower-quality corporate borrowers can be vulnerable when access depends on open markets.

The important point is timing. Refinancing is a gate. When the gate is easy to pass, the system looks calm. When the gate narrows, the system can look calm right up until it doesn’t.

Defaults are the headline event. Refinancing is the quieter process that often sets the stage.

A higher-rate world does not need a crash to change the economy’s tone. It only needs a steady run of maturities that re-price old debt into new terms. That is when cash flow bends. That is when flexibility shrinks. And that is when “nothing broke” can still mean stress is building—one refinance at a time.