Whether you are moving to new premises for business purposes or branching out to additional locations, a commercial mortgage can be a handy option to finance these processes. Rates for this mortgage type can vary depending on multiple factors.
Looking ahead, it can be challenging to know the rates for your specific situation and in 2024.
However, before you select a mortgage such as this, it's crucial to consider the rates. This step can help you understand what your monthly repayments will be.
Our financial professionals have gathered facts about rates for commercial investment mortgages in 2024.
We have also presented our findings after using six mortgage providers for commercial loans. Continue reading for more information.
| Provider | Score | Details |
|---|---|---|
| 1. Allica Bank | ★★★★★ | Click Here |
| 2. Yorkshire Building Society | ★★★★★ | Click Here |
| 3. Lloyds Bank | ★★★★★ | Click Here |
| 4. Assetz Capital | ★★★★★ | Click Here |
| 5. HSBC | ★★★★★ | Click Here |
| 6. Together Money | ★★★★★ | Click Here |
Best Commercial Mortgage Rates — Reviews
We used six commercial mortgage providers and reviewed each option.
To get a commercial mortgage and compare your options, check our first-hand findings of these options.
Provider | Max LTV | Min Term | Max Term | Min Loan | Max Loan |
|---|---|---|---|---|---|
1. Allica Bank Commercial Mortgages | 70% | 5 years | 25 years | £150,000 | £10m |
2. Yorkshire Building Society Commercial Mortgages | 75% | 5 years | 25 years | £300,000 | £20m |
3. Lloyds Bank Commercial Mortgages | 70% | 3 years | 25 years | £25,001 | Subject to status |
4. Assetz Capital Commercial Mortgages | 70% | 5 years | 25 years | £750,000 | £50m |
5. HSBC Commercial Mortgages | 75% | 2 years | 30 years | £25,001 | Subject to status |
6. Together Money Commercial Mortgages | 65% | 5 years | 30 years | £50,000 | £250,000 |
1. Allica Bank Commercial Mortgages
What we liked about Allica Bank's commercial mortgage was the relatively low loan-to-value (LTV) ratio on commercial investment mortgages. The maximum LTV they offered was 70%, but we learned that this could be as low as 50%.
We were eligible for a loan of £10m, the maximum loan amount. However, Allica Bank informed us that lower amounts were available. Their minimum loan amount is £150,000.
We used their variable rate and fixed rate commercial investment loans. With the variable rate loan, we received a 4.50% interest rate when approved for an LTV of more than 70%. With the fixed-rate loan, we received a 9.30% interest rate with an LTV of more than 70%.
Allica Bank asks for fees, such as an arrangement fee of 2%. They also offer other terms of between 5 and 25 years. Loans to help purchase commercial property are available from this provider.
Read More: Allica Bank Savings Review
2. Yorkshire Building Society Commercial Mortgages
When we used Yorkshire Building Society, we found that LTV options potentially as low as 60% applied. The highest LTV reached 75%.
We were eligible for a loan of £20m, which is Yorkshire Building Society's highest commercial mortgage amount. We could take out a lower-value loan of £300,000, the minimum loan amount.
With their fixed rate and five-year options, we received a 7.10% interest rate.
This option provided us with a 60% LTV. Yorkshire Building Society also offers an alternative fixed-rate, five-year option. We found that it offers a 70% LTV and an interest rate of 7.15%
We paid 2% in terms of arrangement fees for the 60% LTV option and 1% for the processing fee. We learned that the arrangement fee for the 70% LTV option increased to 3% and the processing fee was 1%.
Yorkshire Building Society also offers a tracker commercial mortgage. Its rates are bespoke, so will depend on your specific circumstances. Arrangement fees for the tracker option are 2% and processing fees are 1%.
3. Lloyds Bank Commercial Mortgages
When using Lloyds Bank‘s commercial mortgages, we found that a maximum LTV option of 70% is available. This option meant we could borrow up to 70% of the commercial property value with reasonable monthly payments.
We found that the interest rates were bespoke. However, fixed and variable interest rates are available. This provider also indicates that the base rate fluctuates according to the Bank of England rate, which is 5.25%.
In terms of fees, we had to pay arrangement, valuation, and security fees. We had to pay an early repayment fee when we repaid our fixed-rate mortgage.
We could use this mortgage for buy-to-let properties and did not require a business current account with Lloyds to be eligible.
4. Assetz Capital Commercial Mortgages
When we used Assetz Capital, we learned that we could receive a high loan-to-value ratio. The highest LTV we could receive with this provider was 70%. We were pleased that the maximum loan value was £50m. We also found that the lowest loan amount was £750,000 when using this provider.
When we looked into the options before choosing one, we found that loans were available for many small and medium businesses.
We could receive loan terms of up to five years and choose between variable and fixed interest rates. When we used the variable rate options, our loan term could be extended to seven years.
The rates were bespoke. However, we found that they began at 3%. These rates depended on several factors, such as the amount we chose to borrow and the risk to the lender.
Assetz Capital offers interest-only mortgage periods and, in some cases, will offer a loan amount higher than £50m depending on specific loan circumstances.
5. HSBC Commercial Mortgages
We could receive a 75% loan-to-value ratio using HSBC‘s commercial investment mortgage. We found that the maximum loan amount was subject to our status, but that the minimum amount equated to £25,001.
The loan term we secured was 30 years, but we noticed that the term could be as short as 2 years. Fixed and variable rates were available with this provider. Variable rates changed according to the Bank of England Base Rate, which is 5.25%.
We found that an arrangement fee was included when we looked at the fees. This fee depended on our specific circumstances. We also found an early repayment fee applied to our loan when we settled the balance early.
Regarding the fixed rate options, we noticed that the maximum period to fix repayments was 10 years.
Legal charges applied to our HSBC fees, depending on our specific circumstances.
6. Together Money Commercial Mortgages
With Together Money, we received a maximum loan-to-value ratio of 65%. We borrowed the maximum amount of £250,000 but could have applied for a smaller loan at the minimum amount of £50,000.
The rates we paid were 10.49% each year. However, we noticed this could have been higher depending on our business's finances, loan terms, and loan amount. We found that loan terms of 5 years are available. With this mortgage, the maximum loan term is 30 years.
Now, we also had to pay fees. Some fees we had to pay include processing fees and arrangement fees. When we repaid our balance early and in full, we had to pay redemption and early repayment fees.
We found that Together Money makes semi-commercial, land, and residential buy-to-let property mortgages available. To qualify for the commercial property mortgages from Together Money, we found that the property for business purposes needed to be valued at least £50,000.
What Are Commercial Mortgage Rates?
Commercial mortgage rates are interest rates your financial institution charges you for commercial mortgages.
They are the cost of borrowing these funds. You'll see that each rate depends on different factors. For instance, your creditworthiness can affect how high the rates are. Your loan term and the conditions of the market also affect the rates.
Requesting a quote is the best way to see the commercial mortgage rate. However, a few commercial mortgage interest rates are provided as examples. You'll find these examples as an annual percentage rate or APR.
Now, fixed or variable rates apply to commercial mortgages. A fixed-rate commercial mortgage's interest rate will not change. You'll pay the same interest rate from the beginning to the end of the loan term. This type of interest is ideal for budgeting because the repayments will be predictable.
A variable rate commercial mortgage's interest rate will fluctuate. Fluctuations will depend on benchmarks like the prime rate or base rate. Therefore, you can expect the repayments to increase and decrease in line with these rates.
Which Factors Affect the Rates of a Commercial Mortgage?
Multiple factors affect the rates of mortgages for business use.
Some examples that can lead to high or low rates include the following features:
- Financial performance — The financial performance and standings of your company can affect the rate you receive. If your financials are stable and your business is performing well, this can translate to lower interest rates.
- Credit history — Your credit history can influence your rate. With an excellent credit history, you can receive better rates. With a poor credit history, you may struggle to receive a good business mortgage rate.
- Size of the loan — If you apply for a large business mortgage, you can expect higher rates. The main reason is the risk you pose to lenders. Larger loans may also have strict requirements.
- Loan-to-value ratio — The loan-to-value ratio can affect your rate. This ratio describes the loan's value compared to your deposit. With a loan-to-value ratio lower than 60%, your interest rates can be lower.
What Are the Main Types of Mortgages for Business Use?
A few types of mortgages for business use and business loans are available.
Our financial experts have looked at the main examples you may choose between. Check the options below for more information.
Mortgages for Business Premises
Mortgages for business premises are for purchasing commercial property. These are known as owner-occupied mortgages and work if you're renting premises and want to own it. They are also ideal for remortgaging purposes, which can work well if you have found an alternative with a lower interest rate.
Mortgages for Commercial Investment or Investment Properties
You can also choose between mortgages for commercial investment and investment properties. Commercial investment mortgages are ideal for purchasing property to rent it out. This option includes semi-commercial mortgages and commercial buy-to-let.
Semi-commercial mortgages are for residential and commercial properties, including properties above shops. Commercial buy-to-let mortgages are for residential buildings only.
Mortgages for investment properties are for property development. It is ideal for converting properties for business use or constructing a new property you intend to sell as a developer.
Will Lending Decline or Increase for Businesses in 2024?
Lending from banks to businesses is contracting in 2023.
Our financial experts advise that lending will likely decrease in 2024. 2023 saw a contraction of 0.5% in lending to businesses. However, we expect lending to fall by 8% in 2024. Looking ahead to 2025, we forecast that lending will potentially grow 3.7%.
What Are the Likely Commercial Mortgage Rates in 2024?
When looking at the potential fluctuations, our financial experts consider that rates for commercial property mortgages may increase to 5.75% or peak at 6% for a 15-year term option in 2024.
Although the Bank of England held interest rates at 5.25% towards the beginning of December 2023, many financial markets consider that this rate will increase. However, it's worth considering that these rates can change.
Current Rates for Semi Commercial and Commercial Mortgages in 2023
When looking at the current rates for semi-commercial mortgages, we can see that they range between 7% and 7.5%. The average rates provided by common commercial mortgage lenders for 2023 range from 2.5% to 9.99%.
The average rate can increase and decrease and will depend on your financial circumstances and which of the commercial mortgage lenders you choose. Specialist lenders often charge higher rates due to the flexibility they also offer.
Will the Demand for Rental Property Increase in 2024?
The demand for commercial or rental property will likely maintain its current state going into 2024. However, some market experts predict that the supply of rental property will decrease. With this imbalance and the state of the market, the rates of commercial mortgages can potentially increase.
The increase in rates matches the higher competition in the rental property market. However, as mentioned, it's worth considering many other factors that can affect the rates, including your financial standing.
What Are Commercial Mortgage Fees?
Fees for commercial mortgages include broker fees (if you go through a broker), arrangement fees, property valuation fees, legal fees and others.
The broker fee you pay tends to be approximately 1%, plus the lender's fee.
The legal and property valuation fees are approximately £500 each. You will also pay a 1% or 2% arrangement fee, depending on the loan amount and the commercial mortgage broker or lender you select.
Best Commercial Mortgage Rates: The Verdict
Rates for commercial investment mortgages can vary depending on the provider and various other factors. For this reason, we recommend that you review several options. Getting a quote from commercial mortgage lenders is the best way to compare the specific rates for your venture.
Once you have compared the rates, you can find the option that works well for your budget. Ensure you shop around to find the best rates for commercial mortgages.
Purchase a business premises or rental property by selecting from the many business mortgages with the best rates. Get off to the perfect start with your venture with a business mortgage with low-interest rates.
