Commercial Mortgage Rates 2026 — Updated August 2026
- Prime investment (strong covenant, good location)
- 5.5%–6.5% p.a.Prime investment (strong covenant, good location)
- Standard commercial range
- 6.5%–8.0% p.a.Standard commercial range
- Secondary / specialist / complex
- 7.0%–8.5%+ p.a.Secondary / specialist / complex
- Last updated
- August 2026Last updated
Commercial mortgage rates in 2026 range from 5.5% per annum for prime investment assets with strong covenants to 8.5%+ for secondary assets, specialist properties, or lower-quality 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 — August 2026
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| Asset type | Rate range p.a. | Max LTV | Key considerations |
|---|---|---|---|
| Prime office (London/SE, long lease) | 5.5%–6.5% | 65%–70% | Long unexpired lease, strong tenant covenant (FTSE listed, government). |
| Regional office | 6.0%–7.5% | 60%–65% | Location quality, occupancy rate, lease length all assessed. |
| Prime retail (high street / retail park) | 5.8%–7.0% | 60%–65% | Tenant covenant critical. Vacancy risk in secondary retail is significant. |
| Industrial / logistics | 5.5%–6.5% | 65%–70% | Strong demand segment. Good rates for well-let institutional quality assets. |
| Healthcare (GP surgery, care home) | 6.0%–7.5% | 65%–70% | NHS lease = strong covenant. Private care home = higher rate due to operational risk. |
| Mixed-use | 6.5%–8.0% | 60%–65% | Assessed as blend of residential and commercial. LTV typically capped conservatively. |
| Owner-occupier commercial | 6.0%–7.5% | 65%–70% | Business purchasing its own premises. Assessed on business trading performance. |
| Semi-commercial / retail parade | 6.5%–8.5% | 55%–65% | Multiple tenants, shorter leases, higher management complexity. |
| HMO as commercial asset | 6.5%–8.0% | 65%–70% | Large HMOs assessed as commercial asset by some specialist lenders. |
What determines your rate
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.
Worked cost 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.
Rate context and outlook
Commercial mortgage rates in 2026 have stabilised after the significant increases of 2022–2024. The BoE base rate at 3.75% (held July 2026) has reduced from the 5.25% peak, pulling commercial mortgage rates down from their 2023–2024 highs. The commercial property market has bifurcated sharply — prime industrial and logistics assets command the best rates and strongest lender appetite, while secondary retail faces structural challenges that continue to widen rate premiums for that asset class.
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.
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Independent whole-of-market advice · FCA No. 814533