Commercial mortgage rates in the UK

Commercial mortgage rates are one of the most searched and least standardised numbers in property finance, because unlike a residential mortgage there is no best-buy table that fits every borrower. A commercial mortgage rate is assembled for the specific deal in front of the lender: the asset, the loan to value, the income that services the debt and the borrower behind it all move the number. Two buyers of similar units can be quoted materially different rates, and both quotes can be fair.

This guide explains how commercial mortgage rates are actually built, gives indicative ranges for the main types of property debt as a starting point rather than a live rate sheet, sets out what moves your rate up or down, compares fixed and variable, and shows how to put yourself in the way of the keenest terms. We arrange these facilities as a broker and introducer across a panel of lenders; we are not a lender and we do not publish a rate card. Every figure below is indicative, lender and deal dependent, and not an offer of finance, and nothing here is financial advice.

What are typical commercial mortgage rates in the UK?

It helps to separate the three main kinds of property debt, because they price very differently. Commercial term mortgages, the long-term loans that fund a purchase or refinance of a standing income-producing or owner-occupied unit, are the keenest. Development finance, which funds a build in stages, is priced higher for the construction risk. Bridging, a short-term loan against an asset, is priced per month and is the most expensive on an annualised basis because it is fast and flexible. The numbers below are indicative only and move with the market and the deal.

Read those as floors for good deals, not as the rate everyone gets. A keenly priced, low-leverage term loan against a well-let modern unit with a strong borrower can start around the 6 percent mark, while a higher-leverage loan against secondary stock, or a borrower with a thinner track record, will sit above it. The same logic runs through development and bridging. The honest answer to what rate you will pay is that it depends, and the rest of this guide explains on what.

How is a commercial mortgage rate built?

A commercial mortgage rate is a reference rate plus a margin. The reference rate is the lender's cost of money, typically linked to the Bank of England base rate or to a market swap rate for fixed deals, and it is the same for everyone at a given moment. The margin is the lender's charge for the risk of your specific deal, and it is where all the variation lives. When you read that rates start around 6 percent, that is a reference rate plus a thin margin on a low-risk deal; a riskier deal carries a fatter margin on the same reference rate.

This structure is why the same borrower can be quoted different rates by different lenders on the same day: each lender has its own cost of funds and its own appetite for the asset and the risk, so each prices the margin differently. It is also why a broker earns their keep on rate as well as on access, because matching the deal to the lender whose appetite fits it most closely is what compresses the margin. We model the likely rate across our panel before approaching anyone, using the commercial mortgage calculator at /calculators/commercial-mortgage-calculator/ to test the monthly cost at different rates.

What affects the rate you are offered?

Leverage comes first. A lower loan to value means the lender is more comfortably covered if values fall, so the margin shrinks; pushing the loan to value up to the lender's ceiling pushes the rate up with it. Income cover is the second lever: investment lenders test interest cover, the rent divided by the stressed interest bill, and a deal that covers comfortably above the lender's floor prices keener than one that scrapes over it. For owner-occupiers, the strength and profitability of the trading business plays the same role.

Asset quality and the borrower then fine-tune the figure. A modern, well-located unit with a broad lawful use and a strong tenant on a long lease is easy security and prices keenly; a tired unit in a soft location with short income and a narrow planning use is harder, and costs more. The borrower's own track record, credit history and experience matter too. None of these is a single switch; the rate is the sum of them, which is why the most reliable way to learn your rate is to have the deal assessed against the market rather than guessing from a published range.

Should you choose a fixed or variable rate?

A fixed rate locks your interest cost for an agreed period, usually two to five years, buying certainty at a modest premium over the equivalent variable rate. A variable rate tracks a reference rate, typically base rate plus a margin, and moves up or down as that reference moves, so it is cheaper when rates fall and dearer when they rise. Neither is inherently better; the right answer depends on how much rate certainty your plans need and your view of where rates are heading.

Watch the surrounding terms as well as the headline rate. Fixed deals often carry early repayment charges if you redeem during the fixed period, which matters if you might sell or refinance, and the saving on a slightly lower variable rate can be wiped out by a charge you did not expect. We weigh the rate, the term, the flexibility and the exit together when arranging a commercial mortgage at /services/commercial-mortgages/, because the cheapest rate on day one is not always the cheapest deal over its life.

How do you get the keenest commercial mortgage rate?

The levers a borrower controls are leverage, income cover, presentation and lender fit. Putting in a little more deposit to drop the loan to value into a keener band often saves more in interest than the extra deposit costs in opportunity terms. Presenting the deal well, a clean set of accounts or management figures, a clear rent roll, evidence of the asset's quality and the borrower's experience, lets the lender price the real, lower risk rather than padding the margin for uncertainty.

Lender fit is the lever a broker adds. Different lenders want different things, one likes owner-occupiers, another favours multi-let estates, a third prices industrial keenly because it suits their book, and matching your deal to the lender whose appetite fits it best compresses the margin without changing anything about the deal itself. That is the core of what we do: we assess the deal, model the likely rate across the panel, and take it to the lenders most likely to price it finely. Most commercial lending is unregulated, but where a loan would be secured on a borrower's home or otherwise falls within FCA regulation, it is referred to an authorised firm and different protections apply, which we identify at the outset.

Is it difficult to get a commercial mortgage?

It is more involved than a residential mortgage, but not difficult for a sound deal. The lender underwrites both the asset and the borrower: the property must value and let or be occupied sensibly, and the income, whether rent or business profit, must service the loan with a margin of safety. Where a deal struggles is usually a specific, fixable issue, leverage too high for the asset, income cover too thin, a planning use the lender dislikes, or accounts that do not yet show the profitability the lender needs.

The process is also slower and more document-heavy than a residential purchase, with a valuation, legal due diligence and credit underwriting all required, so allowing time and preparing the paperwork early smooths it considerably. A buyer who arrives with a clear deal, realistic leverage and the supporting evidence to hand is rarely turned away by the whole market, even if individual lenders pass.

The role of a broker here is partly access and partly translation: knowing which lenders are lending on industrial property this quarter and at what terms, and presenting the deal so its strengths are visible and its weaknesses are addressed rather than discovered. We size the realistic loan and rate before approaching anyone, using the how much can I borrow calculator at /calculators/how-much-can-i-borrow-calculator/ as a starting point, so a client knows where they stand before the formal process begins. The difficulty, where it exists, is nearly always in the detail of a particular deal, not in the idea of a commercial mortgage itself.