Commercial mortgage rates

Commercial mortgage interest rates are used to calculate the monthly fee you pay to borrow money from a lender for a commercial mortgage. At present, commercial mortgage rates can be from a minimum of 3% above the Bank of England base rate per annum.

Commercial rates vary from one lender to the next, with the maximum being around 13% per annum.

There are no set rates for commercial mortgages, so lenders will complete thorough checks on the application and determine the rate based on its merits.

Lenders will consider several factors to decide on a commercial mortgage rate. The size of loan you need, versus your deposit, will demonstrate to them how much of the risk you are taking on. Your borrowing experience will indicate whether you have successfully managed monthly payments, especially where your experience is specific to commercial lending.

Whether you intend to be an owner-occupier, or are buying the property as an investment to let out, will also determine the rates that you have access to.

Your credit history and, if you are an owner-occupier, the strength of your business, will also be taken into account. You may also be asked to provide personal guarantees, depending on how long your business has been trading for.

Another factor to decide on, when it comes to commercial mortgages, is the rate type. Fixed rates will be set at a certain amount for a set period of time. Tracker rates are commonly tied to the Bank of England Base Rate and Variable rates are tied to the lenders Standard Variable Rate and can vary, based on commercial decisions made by the lender.

Yes, as a general rule the rates for commercial mortgages are higher than those for residential properties.

Mortgage rates are based on risk, and most lenders will see a commercial property to be a riskier investment than a residential property.

This is generally due to the fact that the mortgage payments are reliant on the success of the business or businesses occupying the property. So, the likelihood of the loan defaulting and property being repossessed is higher.

You may also be asked to provide a larger deposit towards a commercial property than for a residential property for the same reason, meaning it will cost you more upfront than a residential mortgage.

If you are applying as an owner-occupier, factors such as your experience as a landlord, as well as your experience of working in the sector or industry your business will be operating in will be considered when considering a commercial mortgage.

Yes, you can get a fixed rate commercial mortgage.

Fixed rates ensure your monthly mortgage payment is the same over the initial rate period. Having a fixed rate makes it easier to plan and budget for the mortgage payments. However, if commercial mortgages rates drop, you will not benefit from the drop.

Variable rates are linked to another rate of charge, often the Bank of England base rate. Your payments can change as a result of any change in the rate of charge. This can be favourable if the rate goes down, but can increase your mortgage payment if the rate goes up.

The type, recency, amount of bad credit and whether or not you have paid back an outstanding sum will influence whether you can get a commercial mortgage.

Severity of a debt can be under or overestimated. The best way to get answers is to call and speak to a broker. Working with lenders every day means a broker can quickly either give you or get you the answers you need.

Each lender is different and some actively seek to lend in areas other lenders do not. So, don’t assume you can’t get a commercial mortgage with bad credit, but do remember it may affect the commercial mortgage rate you are offered.

The best way to reduce your commercial mortgage rate is to provide a larger deposit and reduce your loan to value.

If you have any adverse credit, resolving it and letting some time pass before making an application may help you secure a lower rate. Alongside this, producing a strong business case through your application pack may help and that is where a specialist mortgage broker can help.

High street lenders tend to offer the most competitive commercial mortgage rates in the marketplace, but this is because they will only lend against the lowest risk scenarios. This means that you can’t simply pick a mortgage interest rate and get it.

Commercial lenders have a range of criteria they look for in the property, applicant and industry the building is used for to determine the mortgage rate.

You may find your scenario restricts you to specialist commercial lender rates.