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Mortgage Interest Rates on Commercial Borrowing

What commercial mortgage rates UK should you expect to pay on a commercial loan, and are your existing commercial borrowing products at the most competitive rate on the lending market?

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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Commercial Mortgage Rates UK

One of the essential factors in choosing which business mortgage to apply for is the commercial mortgage rates UK on offer from your lender.

Here we look at how commercial mortgage rates are calculated, what makes a difference to the interest rates offered, and how to find the best commercial mortgage rates on the market.

For more advice and support with finding the best commercial mortgage rates for your business, contact the mortgage brokers team on 0330 304 3040 or drop us a message to [email protected].

What are the Average Commercial Mortgage Rates UK?

Unfortunately, a commercial mortgage rates comparison isn't as simple as having a UK average.

Commercial mortgage lenders don't usually publicise their best commercial mortgage rates or rely on standard terms since every business mortgage is bespoke to the company and circumstances in question.

In essence, the lower risk your application, the better the commercial mortgage rates UK you will be offered.

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How Do Mortgage Lenders Calculate Their Commercial Mortgage Rates UK?

Lenders can offer fixed-rate mortgages or variable loans to businesses depending on their best commercial mortgage rates.

Fixed-rate lending means that you pay a fixed amount over the initial mortgage period, often from two years to a maximum of ten. After the initial term, the best commercial mortgage rates change over to the standard variable rate on offer at the time.

If you take out a variable commercial mortgage, this will be charged according to a percentage above the Bank of England base rate and change as this fluctuates.

Are Commercial Mortgage Rates UK More Expensive Than Residential?

Commercial lending is usually more expensive since business mortgages present a higher risk than residential mortgage lending but the best commercial mortgage rates can reduce those costs.

What Rates Should I Expect to Pay on Commercial Mortgage Borrowing?

Very roughly speaking the best commercial mortgage rates are as follows

  • Owner-occupier mortgages, where your business is buying a property to trade from, will be charged at anywhere from 2.75% to 7%.
  • Investment mortgages for buy to let business properties are usually charged on commercial mortgage rates UK starting at 3.5% and going up to around 6%.

How are Business Mortgage Rates Worked Out?

Your lender will need to understand the property you want to buy, what it will be used for, and whether you can afford the loan before offering the best commercial mortgage rates. Factors include:

  • The type of commercial mortgage - i.e. investment or owner-occupier.
  • What the value of the property is, compared to the mortgage value.
  • Your credit history and trading record.
  • Anticipated returns on the investment.

Where Can I Find the Most Competitive Commercial Mortgage Rates UK?

Every business wants to find the best commercial mortgage rates available on their commercial mortgage, and this isn't easy to pinpoint since interest rates continually fluctuate. Business mortgages are tailored to each application, so independent advice is essential.

Using a broker is undoubtedly the ideal way to secure the best commercial mortgage rates since a whole-of-market broker can:

  • Recommend the most suitable lenders, and commercial mortgage rates UK including niche and specialist providers.
  • Negotiate rates and terms on your behalf following a commercial mortgage rates comparison.
  • Tailor your application to ensure you meet the right criteria for the best commercial mortgage rates.

What are the Eligibility Criteria to Get the Best Commercial Mortgage Rates?

Lenders will look at a combination of factors to decide whether they can offer the best commercial mortgage rates:

  • What sort of mortgage you need - why you are investing in a property and what it will be used for.
  • The Loan to Value ratio - the higher the LTV, the higher the risk and therefore higher the commercial mortgage rates comparison. Most lenders need a deposit from at least 25%; so the more you can offer as a deposit or additional security, the more favourable your application.
  • Credit rating - lenders will need to check if you have any adverse credit history. Where mainstream lenders cannot help, a broker can recommend specialist bad credit providers who will be able to support your mortgage requirements and offer their best commercial mortgage rates.
  • Business history - the longer the business has been trading, and the healthier your operating profit, the easier it is to meet affordability criteria and therefore negotiate lower interest rates.
  • How viable the investment is - this might include providing business plans, analysing the sector, or applying to a lender with experience in your industry.
  • How much you need to borrow. Most commercial mortgages start from £25,000, and the value of the mortgage will dictate which lenders are best placed to offer approval.

What are the Terms and Commercial Mortgage Rates UK on Business Property Mortgages?

Most commercial mortgages can run from as little as three, and for as much as 40 years. The longer the term, the lower the monthly repayments, but the more you are likely to pay overall making a commercial mortgage rates comparison important.

The Revolution Brokers team can help with a commercial mortgage rates comparison based on different mortgage terms to balance out overall costs against short-term cash flow pressures.

How Easy is it to Calculate a Commercial Mortgage Rates Comparison?

It can be challenging to create an accurate commercial mortgage rates comparison since the fees, structure and terms will vary significantly between lenders.

You should always consult a professional broker to run a commercial mortgage rates comparison for you before making multiple applications for comparison since these can involve hard credit searches which impact your credit score and can make applying for competitive lending more difficult.

Is a Business Mortgage Calculator Worth Using for a Commercial Mortgage Rates Comparison?

Mortgage calculators are useful, but very few provide quantifiable information about commercial mortgages since these are quoted bespoke to every business and aren’t a commercial mortgage rates comparison.

To get an idea about how much you can borrow, the top commercial mortgage rates UK and what your monthly payments would be, give us a ring on 0330 304 3040.

Will I Get Better Business Mortgage Rates on a Smaller Loan?

Not really, no - commercial mortgage rates UK are offered on a case-by-case basis, so it won't make a huge difference whether you are applying for a larger or smaller amount.

A commercial mortgage rates comparison will normally show that a lower LTV will mean lower rates since the risk factor is lower.

Do Commercial Mortgage Rates UK Change Depending on Area?

The bespoke nature of commercial lending means that any commercial mortgage rates comparison will show that your interest rates will depend heavily on your circumstances, the type of investment, and which lender you apply to.

Scottish Commercial Mortgages

You can find that some commercial lenders will not offer mortgages in the Highlands, away from the mainland, or some restricted postcode areas making it harder to achieve the best commercial mortgage rates.

Northern Ireland Business Mortgages

With fewer commercial lenders to choose from, it is vital to use an experienced broker to negotiate terms on a business mortgage for a property in Northern Ireland.

Professional Advice and Commercial Mortgage Rates Comparisons

For further advice, and tailored recommendations about how and where to secure the best commercial mortgage rates on your commercial mortgage, contact the Revolution Brokers team.

As experts in UK business lending, we scour the whole of the market to offer the most attractive deals and appealing terms to our clients. Call us on 0330 304 3040 or email at [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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