Commercial Mortgage and Property Loan Interest Rates UK: Rates by LTV, Property and Product

Business property mortgage rates in the UK are priced as a margin above the Bank of England base rate — 3.75% at the time of writing (September 2026) — or as a fixed rate agreed for an initial term. The margin a lender charges reflects their assessment of risk: lower LTV, stronger borrower financials, and prime property all compress the margin, while higher leverage or secondary locations widen it.

The table below shows indicative rate ranges across typical LTV bands for owner-occupier and investment commercial mortgages. These figures reflect current specialist and challenger bank pricing and are illustrative of the market rather than a formal quotation.

Investment rates sit slightly above owner-occupier rates because lenders view rental income as a less certain form of debt service than a trading business's own cashflows — particularly where the commercial tenant base is concentrated or leases are short. Lenders typically require rental income to cover debt service by at least 125% to 145% on an interest coverage ratio basis, calculated at a stressed rate above the actual contracted rate.

For mixed-use semi-commercial property — such as a ground-floor retail unit with residential flats above — some lenders apply a blended rate or assess the residential and commercial elements separately. Specialist lenders frequently offer more flexible terms on semi-commercial than high-street banks, which is one reason that access to a wide lender panel produces meaningfully different outcomes than approaching one or two institutions directly.

The choice between a fixed and variable rate is one of the most consequential decisions you will make when structuring a commercial property loan. Each has clear advantages depending on your cashflow requirements, investment horizon and view on future interest rate movements.

Fixed rates lock your interest cost for a set period — commonly 2, 3 or 5 years — giving you certainty over monthly debt service costs. This is especially valuable for commercial investors whose rental income is fixed under long-term leases. The trade-off is that fixed-rate products almost always carry early repayment charges (ERCs), which can be material if you sell or refinance before the fixed term ends.

Variable rates — whether a tracker priced at Bank of England base rate plus a margin, or a lender's standard variable rate (SVR) — move with the market. When the base rate falls, your payments reduce automatically. Variable products tend to offer greater flexibility for redemption, making them attractive where an exit within 12–24 months is anticipated.

When a fixed-rate term expires, most lenders automatically move the borrower onto their SVR, which is typically higher than the initial rate. Borrowers who miss this reversion date can end up paying significantly more than necessary — a common and costly oversight in commercial property finance.

Lenders do not apply a single rate to all commercial borrowers. Pricing is individualised and driven by a set of risk factors that any experienced broker will use to position your application before it reaches a credit committee.

Loan-to-value is the ratio of the loan amount to the lender's assessed value of the property, expressed as a percentage. It is the most direct lever borrowers have over their commercial property interest rate — and understanding it allows you to make strategic decisions about how much equity to deploy.

Most commercial mortgage lenders in the UK will lend up to 70%–75% LTV on investment commercial property, with some specialist lenders offering up to 80% LTV on semi-commercial assets (those with a residential element). Owner-occupier commercial mortgages can occasionally reach 80% LTV where the business trading from the premises is strong.

As a general principle, every 10 percentage points of LTV reduction tends to shave 0.25%–0.75% off the interest rate margin, though this varies by lender and asset. Borrowing at 50% LTV versus 70% LTV on a £1m property could mean the difference between a rate of 5.75% p.a. and 6.75% p.a. — a saving of £10,000 p.a. in interest on a £1m loan.

The lender's valuation, not the purchase price or the borrower's estimate, determines the LTV. Commercial valuations are carried out by RICS-qualified surveyors and use the investment method for income-producing assets — capitalising the passing rent or estimated rental value (ERV) at a market yield. Understanding how your asset will be valued is therefore essential to predicting what LTV you will be offered. Our guide to GDV vs market value explains the key distinctions between valuation methodologies used in property finance.

If you are purchasing at a price above the lender's assessed value — for example, paying a premium for development potential — the LTV will be calculated on the lower of the two figures, which can significantly reduce the loan available and push you into a higher rate band.

The table below shows indicative rate ranges for common commercial mortgage scenarios in the current UK market. These are general market benchmarks reflecting typical conditions; your individual rate will depend on the specific factors described above. All rates shown are p.a. and apply to both capital repayment and interest-only structures, as the rate itself does not change based on repayment method.

Interest-only commercial mortgages — where the borrower services only the interest each month and repays capital at the end of the term through a sale or refinance — are widely available and particularly common for investment properties. Interest-only products are priced at the same rate as capital repayment mortgages; the distinction is purely structural and does not attract a rate premium.

For portfolio landlords taking commercial security against large HMOs held in limited companies, or for borrowers acquiring at auction and later refinancing to long-term commercial mortgage, the sequencing of bridging finance and term debt matters. Short-term bridging or auction finance typically carries materially higher rates than the term mortgage that replaces it — often 0.75–1.25% p.m. against 6–7% p.a. — so the fastest possible transition to the long-term facility minimises carry cost. Planning the exit into a term commercial mortgage at the point of acquisition, rather than after the bridge completes, consistently produces sharper overall pricing.

The table below shows indicative rate ranges across the main commercial lending products available to UK property investors and developers. These are market-wide figures based on publicly available lender rate information; individual deals are priced according to the factors described above and will vary accordingly.

Rates across all categories move broadly in line with the Bank of England base rate. When base rate rises, lenders pass this through to variable-rate products within their pricing cycle. Fixed-rate products insulate borrowers during the agreed term but carry a premium that reflects the lender's cost of hedging that interest rate risk. Specialist products such as auction finance (short-term bridging designed to meet 28-day auction completions) and joint venture finance (where the lender takes a profit share in place of market-rate interest) sit outside these standard ranges and are priced case by case.

Headline rates published by lenders represent best-case pricing — the deals where LTV, covenant strength, and asset quality are all optimal. In practice, lenders operate wide pricing bands and the rate on your deal depends on how your application is structured and which lenders you approach. For further context on how lender appetite varies by institution type, see our guide on bank vs specialist development finance.

The interest rate on a commercial property loan is only one element of the total cost of borrowing. A complete financial appraisal should capture every fee the borrower will pay across the life of the facility, because a seemingly cheaper rate can become the most expensive option once set-up costs, ongoing charges and exit fees are included.

Arrangement fees are frequently added to the loan rather than paid up front, which increases the effective interest cost because borrowers pay interest on the fee over the loan term. For a £500,000 facility with a 2% arrangement fee rolled in, that is an extra £10,000 of principal accruing interest for the duration of the loan — the true cost should be modelled on the all-in basis.

Valuation fees scale with property value and complexity. A straightforward industrial unit or single-let office might attract a £1,000–£2,500 valuation; a multi-let retail parade, mixed-use block, or specialist asset can cost £5,000 or more. A structural or building condition survey may be required in addition. These fees are borne by the borrower regardless of whether the loan proceeds.

Commercial mortgage interest is generally deductible against rental income for tax purposes when the asset is held in a limited company structure — unlike residential buy-to-let, where mortgage interest relief for individual landlords has been restricted. This tax efficiency is one of the drivers behind the prevalence of SPV ownership for commercial investment.

Commercial property finance is not a single product. The rate you pay depends heavily on the instrument you use, and understanding the difference between a commercial mortgage and a commercial bridging loan is essential for any property investor or developer.

A commercial mortgage is a long-term facility — typically 5 to 25 years — intended for stabilised, income-producing assets. Interest rates are correspondingly lower, reflecting the longer-term nature of the security and the predictability of repayment from ongoing rental income.

A commercial bridging loan is a short-term facility — usually 3 to 24 months — used to bridge a gap: completing a purchase quickly before refinancing, acquiring a property at auction, funding a refurbishment, or holding an asset while planning consent is sought. Bridging rates are quoted monthly and typically range from 0.65% to 1.2% p.m. (approximately 7.8% to 14.4% p.a.), reflecting the short duration and higher risk profile. Auction finance is a sub-category of commercial bridging used specifically to meet the 28-day completion timeline that characterises commercial property auctions.

For larger or more complex schemes — for example a brownfield regeneration site being acquired and held prior to development — a joint venture or development finance structure may be preferable to a standalone commercial mortgage. Our guide to development finance vs bridging loans explores these distinctions in greater depth for development-focused borrowers.

The commercial property lending market is not homogeneous. High-street banks, challenger banks, specialist property lenders, insurance-backed lenders and debt funds all operate with different appetites, pricing models and credit criteria. A rate that one lender declines or prices punitively, another may welcome at a competitive margin.

There are several concrete steps borrowers can take to maximise their chances of securing the lowest available rate. First, reduce LTV where possible — equity is the single most effective rate lever. Even a modest additional deposit that takes borrowing from 70% to 65% LTV can generate meaningful savings over a five-year hold. Second, present a complete, well-organised application. Lenders price for uncertainty; a thorough information memorandum that addresses the asset, tenancy schedule, borrower balance sheet and exit strategy removes ambiguity and gives the credit team confidence to price keenly.

Third, engage a specialist broker with genuine lender relationships rather than applying direct to a single institution. High-street lenders publish commercial mortgage rates, but their published rates rarely represent the best available in the market. Specialist and challenger lenders — who may not advertise widely — frequently offer more competitive terms for the right deal. Drawing on Matt's 25+ years of experience and a 100+ lender panel, Construction Capital accesses pricing tiers not available to borrowers who approach lenders directly.

Fourth, consider whether a fixed or variable rate serves your strategy. If you anticipate selling or refinancing within 24 months, a variable rate with no ERCs may cost less in total even if the nominal rate is marginally higher. If you are holding for five years or more, locking in a fixed rate protects against a rising rate environment.

Finally, review the full cost of the loan — not just the headline rate. A 5.0% rate with a 2% arrangement fee and a requirement for a full structural survey may cost more in year one than a 5.5% rate with a 1% fee and a desktop valuation. Model every cost component before making a final decision. Our bank vs specialist lender guide sets out the trade-offs in detail.