Commercial Mortgage Rates 2026 — Updated October 2026
- Prime investment (strong covenant, good location)
- 6.0%–7.0% p.a.Prime investment (strong covenant, good location)
- Standard commercial range
- 7.0%–8.5% p.a.Standard commercial range
- Secondary / specialist / complex
- 8.5%–9.5%+ p.a.Secondary / specialist / complex
- Last updated
- October 2026Last updated
Commercial mortgage rates in 2026 range from 6.0% per annum for prime investment assets (industrial/logistics, long lease, strong tenant covenant) to 9.5%+ for secondary assets, specialist properties, or weaker covenants. Unlike residential mortgages, commercial mortgage rates are highly bespoke — the lender's assessment of the property, tenant, lease, and borrower all feed into a rate that is not published on a product sheet but negotiated on each deal.
Commercial Mortgage Rates by Asset Type — October 2026
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| Asset type | Rate range p.a. | Max LTV | Key considerations |
|---|---|---|---|
| Prime office (London/SE, long lease) | 6.0%–7.0% | 65%–70% | Long unexpired lease, strong tenant covenant (FTSE listed, government). |
| Regional office | 6.5%–8.0% | 60%–65% | Location quality, occupancy rate, lease length all assessed. |
| Prime retail (high street / retail park) | 6.0%–7.5% | 60%–65% | Tenant covenant critical. Vacancy risk in secondary retail is significant. |
| Industrial / logistics | 6.0%–7.0% | 65%–70% | Strong demand segment. Good rates for well-let institutional quality assets. |
| Healthcare (GP surgery, care home) | 6.5%–8.0% | 65%–70% | NHS lease = strong covenant. Private care home = higher rate due to operational risk. |
| Mixed-use | 7.0%–8.5% | 60%–65% | Assessed as blend of residential and commercial. LTV typically capped conservatively. |
| Owner-occupier commercial | 6.5%–8.0% | 65%–70% | Business purchasing its own premises. Assessed on business trading performance. |
| Semi-commercial / retail parade | 7.0%–9.0% | 55%–65% | Multiple tenants, shorter leases, higher management complexity. |
| HMO as commercial asset | 7.0%–8.5% | 65%–70% | Large HMOs assessed as commercial asset by some specialist lenders. |
What moves commercial mortgage rates
Interest Coverage Ratio (ICR)
Commercial mortgage affordability is assessed on whether rental income covers the mortgage interest by a defined multiple — typically 125%–150% at the stress rate. The ICR is the commercial equivalent of the BTL rental coverage ratio. It determines the maximum loan amount.
Tenant covenant
The financial strength of the tenant is one of the most important factors in commercial mortgage pricing. A government body or FTSE 100 tenant on a long lease is near-maximum security. A single-tenant SME on a short lease is significantly higher risk.
Lease length
Unexpired lease term (ULT) matters — a 15-year ULT with no breaks is very different from a 3-year ULT or a break clause in 18 months. Most lenders want the lease term to exceed the mortgage term.
Asset location and liquidity
Prime commercial assets in liquid markets (Central London, major regional cities) are easier to sell if the lender needs to enforce — which lowers the lender's risk and the rate. Secondary locations or unusual asset types reduce liquidity and push rates up.
Owner-occupier vs investment
Owner-occupier commercial mortgages are assessed on the business's trading performance (accounts, profitability, debt service history) rather than rental income. They carry some additional complexity but are supported by a wider lender pool.
Term
Commercial mortgages typically run for 5–25 years. Shorter terms (5–10 years) with balloon payments at maturity are common on investment properties. Longer terms (15–25 years) are more common for owner-occupiers.
What a commercial mortgage costs: worked example
- Annual interest at 6.0%
- £45,000
- Arrangement fee (1.5%)
- £11,250
- Gross yield
- £72,000 / £1,200,000 = 6.0%
- Net yield after mortgage interest
- £27,000 / £1,200,000 = 2.25%
Scenario: £750,000 commercial investment mortgage on a £1,200,000 industrial unit (62.5% LTV)
Tenant: national logistics company. 10yr lease, 7 years unexpired. Rent: £72,000/year.
Rate: 6.0% p.a. (prime industrial)
Interest coverage ratio (ICR): £72,000 / £45,000 = 1.60x (above 125% threshold — passes)
The net yield illustrates why capital growth matters for leveraged commercial investment — the income yield alone is marginal after debt service.
Rates rose in September — lock in today, review before completion
The figures above are indicative and describe the best case. Send your own scenario and we will come back the same working day with terms from the lenders that actually fit it.
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Rate context and outlook
The Bank of England held Bank Rate at 3.75% on 17 September 2026, its sixth consecutive hold, but three of nine MPC members voted to raise it to 4.0%. The Committee warned policy may have to tighten if the Middle East conflict persists.
Fixed rates are priced from swap rates, and the 2-year swap rose from 4.26% on 3 September to above 4.70% by mid-month, so most major lenders repriced fixed rates upward two or three times in September. The next decision is on 5 November. If your deal ends in the next six months, securing a rate now and reviewing it before completion is the lower-risk approach.
Reviewed by David Doulton, Director, Doulton Bridging Finance — over 20 years in property finance. Last reviewed 1 October 2026. Doulton Money Ltd t/a Doulton Bridging Finance, FCA No. 814533.
How Commercial Mortgage Rates Are Priced
Unlike residential mortgages, commercial mortgage rates are rarely advertised at a fixed level. Lenders price individually based on: the loan-to-value ratio, the property type and covenant strength of any tenant, the borrower's trading history and financial accounts, the lease structure (length, break clauses, tenant covenant), and the lender's current sectoral appetite.
Rates are typically expressed as a margin over SONIA (Sterling Overnight Index Average) or at a fixed rate for shorter terms.
Loan-to-Value (LTV)
The single biggest lever. At 50% LTV you will pay significantly less than at 70% LTV with the same lender.
Loan Size
Larger loans (above £1m) may attract keener rates due to lender relationship value. Very small loans (<£150k) can attract premium pricing.
Business / Borrower Profile
Strong accounts, good credit, experienced directors - all of these reduce perceived risk and push rates down.
Lender Types
| Lender type | Best suited to |
|---|---|
| High Street Banks | Established businesses, strong accounts, simple property |
| Challenger Banks | Growing businesses, newer companies, limited trading history, slightly complex cases |
| Specialist Lenders | Adverse credit, complex structures, unusual property types, investment |
| Pension Fund Lenders | Long-let investment assets, strong covenants |
| Private Credit Funds | Time-sensitive, non-standard, very complex cases |
Fixed vs Variable Rates
Most commercial mortgage borrowers choose between a fixed rate for 2-5 years (providing payment certainty) and a variable rate that tracks Bank of England base rate.
Early repayment charges (ERCs) on fixed-rate products typically range from 1-3% of the outstanding balance in the early years, tapering to zero by the end of the fixed term. Always check ERC terms before committing to a fixed rate product. See fixed vs variable mortgages for more on the trade-off.
What Lenders Look for in a Commercial Mortgage Application
- 3 years of trading accounts (ideally showing profitability and growth)
- Business plan for new or start-up businesses
- Personal and business credit history
- Details of the property, including use class, EPC rating, and any planning permissions
- Evidence of existing tenancy or proposed tenancy
- Personal guarantee (standard for limited company borrowers)
Model repayments with our commercial mortgage calculator, or speak to our commercial mortgage broker team for a case-specific illustration.
Frequently asked questions
What is the ICR in a commercial mortgage?
ICR (Interest Coverage Ratio) is the ratio of annual rental income to annual mortgage interest. Lenders require the ICR to be at least 125%–150% — meaning the rent must cover 1.25–1.5 times the interest payment. On a £700,000 mortgage at 6% interest (£42,000/year), the minimum required rent is £52,500/year (at 125% ICR) to £63,000/year (at 150% ICR).
Can I get a commercial mortgage as an individual or must I use a company?
Both are possible. Many investors hold commercial property personally, particularly for owner-occupied premises. Investment property is also commonly held in a limited company for tax reasons. Lenders assess both personal and company applications — the criteria differ but both routes are viable.
What is the minimum deposit for a commercial mortgage?
Most commercial mortgage lenders require a minimum deposit of 30%–35% (65%–70% LTV maximum). Secondary assets, specialist properties, or weaker covenants typically require 35%–45% deposit. Commercial mortgages have more conservative LTV caps than residential mortgages due to the lower liquidity of commercial assets.
How long does a commercial mortgage take to arrange?
Commercial mortgages typically take 6–12 weeks from application to completion — longer than residential. The legal due diligence on the property (title, planning, environmental, lease review) and the detailed credit assessment of the business/tenant are the main time factors. Complex transactions or large loans can take longer.
Can I get a commercial mortgage on a property I want to convert?
A conversion (commercial to residential, for example) is typically funded through development finance rather than a commercial mortgage, since the property is changing its use and physical form during the finance period. Once converted and let or sold, the completed asset can be refinanced onto a commercial mortgage or residential mortgage as appropriate.
Can I get a commercial mortgage as a start-up business?
It is possible but harder. Most high street lenders require 2-3 years of trading history. Specialist lenders and challenger banks will consider start-ups with a strong business plan, experienced directors, significant deposit (40%+), and a personal guarantee.
Do EPC ratings affect commercial mortgage availability?
Yes, increasingly so. Legislation requiring commercial properties to reach EPC Band B by 2030 has made lenders more cautious on lower-rated properties. Properties rated E, F, or G face higher rates, shorter terms, or lender refusal in some cases. Improvement works can be financed through a commercial bridging loan before remortgaging.
Are commercial mortgage rates fixed or variable?
Both options are available. Fixed rates offer payment certainty, typically for 2, 3 or 5 years. Variable rates (tracker or SVR) can move with base rate changes.
Do commercial mortgage rates include arrangement fees?
No. Rates quoted are the interest rate only. Arrangement fees (typically 1-2% of the loan) are charged separately by the lender and should be factored into the overall cost comparison.
Can I switch my commercial mortgage to get a better rate?
Yes. Refinancing a commercial mortgage is common, especially when your property has increased in value or better rates are available. Early repayment charges may apply on fixed-rate products.
How much can I borrow?
Usually 4 to 4.5 times income, with some lenders going to 5 or 5.5 times for higher earners and certain professions, subject to affordability.
How long does a mortgage take?
A mortgage in principle takes minutes to a day; a full offer usually takes 2–4 weeks from application.
Is a lower rate with a high fee better than a no-fee deal?
It depends on the loan size. On smaller loans the no-fee deal often wins; we compare the total cost over the fixed period.
How early can I remortgage?
You can secure a new deal up to six months before your current one ends.
What documents will I need?
ID, proof of address, 3 months' payslips and bank statements, or 2 years' accounts or tax calculations if self-employed.
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Independent whole-of-market advice · FCA No. 814533