Alaina J. Joseph

With the right strategy, financing or refinancing your aircraft before year-end can be smooth, strategic and rewarding. 

Let’s start by looking at interest rates and where they’re projected to go by December 31st. Today, rates are anywhere from 0.25% to 0.75% lower than the rates we’ve seen for the majority of 2025. 

Changing Interest Rates: What’s Next?

Revised labor data, out this month, showed 911,000 fewer job creations than initially estimated by the U.S. Bureau of Labor Statistics. 

This, combined with inflation data showing the core Consumer Price Index (CPI) rose 3.1% compared with last year, allowed the Federal Reserve to make a 0.25% rate cut last week. The rate cut signals that the Fed believes there’s more downside risk in the labor market. But they aren’t committing to any major adjustments while inflation is still coming in hotter than their 2% target. 

Usually, the Federal Open Market Committee (FOMC) shares guidance on expectations for future monetary policy adjustments with a briefing from the Fed chair, Jerome Powell. The committee also releases the “dot plot,” which shows members’ expectations of where rates will go over the next few years.

The guidance from this meeting, however, was a bit fuzzy, as we continue to get conflicting economic data and the net impact of tariffs is not yet known. 

The Fed’s latest dot plot offers no clear signal on where short-term interest rates may head next. Therefore, we will continue to keep our eye on economic data and look for clues for what the Fed will do next. What is certain is that aircraft loan rates are lower today than they’ve been for most of the year. So how can you make the most of it?

Lower Interest Rates Signal New Opportunities

Many owners pay cash or finance smaller percentages of their aircraft purchases. However, today’s lower interest rate environment might signal new opportunities. 

For example, owners can leverage equity in their existing aircraft or finance their next purchase, which frees up cash for their business or other investments. 

Additionally, borrowers may benefit from a variable-rate loan if short-term rates continue to decline. Recently, variable rates ran higher than longer-term fixed rates due to the inverted yield curve. 

By structuring an aircraft loan with a variable rate, borrowers can often reduce prepayment penalties. They may also reap the benefit from continually declining rates over time.

As we often advise, talk to your aircraft lender early and often. Together, you can strategize how to best take advantage of current interest rates and prepare for a smooth year-end purchase or refinance.

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Geopolitical tensions. Persistent inflation. Uncertain central bank policy. These factors are stirring volatility across global financial markets—and aircraft financing is no exception.

As interest rate expectations shift and economic signals remain mixed, aircraft owners and buyers face a dynamic landscape.

So what does this mean for financing strategies? And how can buyers navigate today’s uncertainty with confidence?

Let’s take a quick dive into the numbers.

Economic Data: A Murky Outlook

The past few weeks have been eventful, marked by a flurry of economic data releases and ongoing uncertainty over trade policies.

First-quarter GDP data showed the U.S. economy contracted at a 0.3% annual rate, the first contraction since 2022. This slowdown was driven largely by a surge in U.S. imports, as businesses rushed to stockpile goods ahead of possible tariffs. 

However, this GDP estimate likely overstates first-quarter weakness in the U.S. economy due to that import spike.

Even so, the full impact of trade policies has yet to be seen in broader economic data, suggesting more softness could be on the horizon.

Central Bank Policy: A Balancing Act

These mixed signals leave the Federal Open Market Committee (FOMC) facing a tough balancing act.

At its May meeting, the FOMC voted unanimously to hold rates steady. Balancing the Fed’s dual mandate of price stability and maximum employment is proving to be a challenge.

So far, first-quarter data shows no clear impact from tariffs on unemployment or inflation.
This leaves the FOMC with tough choices on which priority to address first.

Much like pilots navigating turbulent skies, the FOMC is monitoring the instruments closely. They’re waiting for clearer economic signals before charting their next course.

Financial Market Volatility: Rates in Flux

These uncertainties have sparked ongoing volatility in the financial markets.

With GDP signaling weakness, inflation still running slightly above the Fed’s 2% target, and unemployment still stable, markets are reacting to these conflicting cues. 

Fed funds futures markets have pushed rate cut expectations further out, now pricing in roughly three 0.25% cuts through the end of 2025. Though, rate expectations have remained volatile since the beginning of the year.

Looking at the 10-year Treasury Rate—a key barometer for aircraft loan interest rates— we’ve seen 50-basis point swings in both directions over the past few months. It ultimately ended (as of this writing) nearly where we started the year, around 4.5%

Impact on Aircraft Financing: Stability Matters

So, what does this mean for aircraft financing?

While aircraft loan rates remain volatile, they’re still below the peak we saw in late 2023. We expect these fluctuations to continue. However, for qualified buyers, this shouldn’t deter action.  

When economic activity slows, it’s not unusual to see credit tightening. While some banks may start to pull back, we remain committed to supporting aircraft buyers through our consistent underwriting approach and deep industry knowledge.

Our advice? Work with a strong, experienced finance institution to provide stability and guidance in these turbulent times.

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