Commercial mortgage rates: what sets them
Commercial mortgage rates are priced case by case. A strong owner-occupied deal at 50–60% LTV can price close to the best buy-to-let rates. A vacant, specialist or heavily leveraged property will cost noticeably more. The main factors are:
- Loan to value: most lenders go to 60–75%. The lower the LTV, the better the rate.
- Property type: offices, retail, industrial, mixed-use and semi-commercial, leisure, or specialist uses such as care homes and hotels.
- Income: the tenant's covenant and lease length for investment property, or the trading accounts for owner-occupiers.
- Borrower: experience, credit history and other assets.
- Fixed or variable: many commercial loans track Bank Rate plus a margin, and fixes of 2–10 years are widely available.
Owner-occupied vs investment
Owner-occupied commercial mortgages
For a business buying its own premises, the lender looks at whether the business profits cover the repayments, usually with a margin of 1.25–1.5 times (debt service cover). They'll want two to three years' accounts and sometimes management figures.
Commercial investment mortgages
For a let property, the rent has to cover the interest, often by 125–150% at a stressed rate, which is similar to buy-to-let. A long lease to a strong tenant supports better terms.
Semi-commercial and mixed-use
A shop with a flat above, or offices with residential upstairs, is usually treated as semi-commercial. Some specialist lenders go to 75% LTV on these, and they often price better than pure commercial property. For buy-to-let figures on the residential part, see the buy-to-let mortgage calculator.
Why use a commercial mortgage broker?
Commercial lending isn't priced on a public rate table. Lenders set terms deal by deal, and many specialist lenders only work through brokers. We know which lenders take which property types and how each one assesses income, and we package the case so it's credit-ready. That usually means a better rate or a higher loan than approaching a bank directly. You can also browse live products on our sourcing tool.
Frequently asked questions
What are commercial mortgage rates in the UK?
They're priced individually. Strong owner-occupied or well-let investment cases at modest LTVs get the keenest rates, while higher LTVs, vacant or specialist property cost more. A broker can get real terms for your case from several lenders.
How much deposit do I need for a commercial mortgage?
Usually 25–40%. Most lenders go to 60–75% loan to value depending on the property and your income. Additional security can sometimes reduce the deposit.
Can I get a commercial mortgage for a new business?
It's harder, but possible, especially with a strong deposit, relevant experience, a solid business plan or additional security. Specialist lenders are often more flexible than high-street banks.
How long is a commercial mortgage term?
Typically 3 to 25 years, and some lenders go to 30. Interest-only periods are common on investment property.
Is a commercial mortgage regulated?
Usually not. It becomes regulated if you or a close family member will live in 40% or more of the property.