Understanding current commercial mortgage rates in the UK

Commercial mortgage rates in the UK vary more than residential rates because they’re tailored to each business and property. The interest you’re offered will depend on your financial strength, the loan details, and wider market conditions.

If you understand what affects these rates and keep up with market trends, you can make better decisions when buying, refinancing, or investing in commercial property.

What are the key factors influencing commercial mortgage rates?

Bank of England base rate

The Bank of England’s base rate is one of the biggest influences on commercial mortgage costs. When the base rate goes up, variable or tracker commercial mortgages usually rise too. When it goes down, repayments can become cheaper.

In recent years, high inflation pushed the base rate up, making borrowing more expensive. As inflation has eased, the base rate has started to come down, offering some relief. However, rates are still higher than they were before 2022, so it’s important to plan for potential changes.

Economic conditions

A strong economy, with growth, high employment, and healthy business performance, usually leads to more competitive lending rates. In a downturn, lenders may raise rates or tighten their lending criteria because they see a higher risk of businesses struggling to repay.

Loan-to-value (LTV) ratio

The LTV ratio is the percentage of the property’s value you borrow. A lower LTV, meaning you put down a bigger deposit, usually gets you a lower rate. Many of the best deals are available when the LTV is 60% or less.

Credit profile and financial strength

Your business’s credit score, payment history, debt levels, and profitability all matter. Strong, stable finances make you a safer bet for lenders and this usually means better rates. If your credit score needs work, make sure to pay down debts and show consistent, healthy cash flow before applying. You can also read our tips on how to improve your business credit score. 

Loan purpose and property type

Owner-occupied properties often get slightly lower rates than investment properties. Lenders also look at the type of property and its sector. Some property types, like standard offices, are seen as lower risk than specialist industrial sites. For investment properties, a long, secure lease with a reliable tenant can help you secure a better deal.

Current trends in commercial mortgage rates

Keeping an eye on current market trends will help you understand where commercial mortgage rates are now and where they might be headed. As of 2025, several notable trends are shaping the landscape for commercial borrowing:

• Inflation and rate movementsRates climbed quickly in 2022 and 2023 as inflation surged, pushing borrowing costs sharply higher. From 2024 into 2025, inflation began to fall and rates eased slightly, giving borrowers some relief. Even so, they remain higher than before 2022.At the moment, conditions are more stable, but changes in inflation or Bank of England policy can still move rates up or down. When planning your borrowing, allow some extra room in your budget so you can manage any unexpected increases.Competition between lenders

• Banks, building societies, and newer lenders are competing for business. Even in a higher-rate environment, this competition can mean promotional deals, fee reductions, or slightly better rates for the right borrowers.

• Green financing incentives

• Some lenders now offer better rates for energy-efficient properties or for projects that include eco-friendly upgrades, such as solar panels or improved insulation. This trend is growing and can reduce both borrowing costs and future energy bills.

Comparing commercial mortgage offers

Not all commercial mortgages are the same, so it’s important to compare more than just the headline interest rate. Here are some factors to consider:

Total cost of borrowing (APR and fees)

The interest rate is only part of the picture. Factor in all fees — such as arrangement fees (often 1%–2% of the loan), valuation fees, legal costs, broker fees, and any early repayment or exit charges. These can significantly increase the overall cost. Where possible, use the Annual Percentage Rate (APR) to compare offers on equal terms, as it reflects both interest and fees. A slightly higher rate with low fees may work out cheaper than a low rate with heavy fees. Always ask lenders for a full breakdown and calculate the total cost over the expected term. Don’t forget to also account for Stamp Duty Land Tax (SDLT), which applies when you buy commercial property. You can read more about how it works in this guide to stamp duty on commercial properties.

Fixed vs variable rates

Fixed-rate mortgages lock in your rate for a set period (commonly 2, 3, 5, or 10+ years), giving certainty and stable repayments. This is helpful if you expect rates to rise or want predictable budgeting, but you won’t benefit if rates fall, and early repayment can trigger penalties.

Variable rates, often quoted as “base rate + margin,” may start lower than fixed rates and can fall if the base rate drops. However, they will rise if rates go up, which can increase your repayments. They sometimes offer more flexibility, but terms vary by lender. Some businesses split borrowing between fixed and variable to balance stability and potential savings.

Loan term

Loan terms range from about 5 years up to 25 years or more. Shorter terms mean higher regular repayments but much lower total interest. Longer terms reduce monthly costs and ease cash flow but increase the total interest paid, and may carry slightly higher rates. Match the term to your business’s plans and cash flow. If you expect to sell or refinance soon, a shorter term or one with an easy exit may be better. For a long-term property, a longer term may provide stability — just weigh the extra interest cost.

Tips for securing the best commercial mortgage rates

Finally, what can you as a business borrower do to get the most favourable rate possible? Here are some actionable tips to improve your chances of landing a great deal on a commercial mortgage:

1. Lower your LTVThe lower your LTV, the less risk the lender takes on and the better the rate you’re likely to get. If you can, increase your deposit or look at properties that sit comfortably within your budget to drop into a lower LTV band.

2. Improve your financial and credit positionLenders want to see that you manage money reliably. In the months before applying. In the 6-12 months before you apply, make sure to pay down revolving debt, clear or settle any outstanding issues, correct errors on your credit reports, and keep all payments on time.

3. Present strong numbersA good rate is largely about lender confidence. Go in prepared with: Up-to-date accounts and management figures; realistic cash-flow forecasts; evidence of regular, recurring income (e.g. contracts or retainers). The more clearly you can show that mortgage repayments are comfortably affordable, the more flexible lenders will be on pricing.

4. Strengthen your storyNumbers matter, but lenders also want to see the bigger picture. For owner-occupied properties, explain how the premises will support business growth (e.g. more space, better location, lower running costs).For investment properties, emphasise tenant quality, lease length, rental cover, and any value-adding improvements planned. A strong narrative reassures lenders that the loan supports long-term stability.

5. Shop the marketDifferent lenders have different appetites by sector, region, and loan size. It's useful to compare multiple offers to see which gives you the most competitive rate.

6. Negotiate fees and termsA “good deal” isn’t just about the interest charged. Arrangement fees, valuation costs, early repayment charges, and exit fees all add up. Don’t be afraid to ask for reductions or to have certain fees rolled into the loan. A slightly higher rate with lower fees may save you more in the long run.

7. Consider green improvementsMany lenders are rewarding energy efficiency with rate discounts. Improving the property’s EPC rating or adding sustainability features like solar panels or insulation could qualify you for better pricing. You’ll also reduce operating costs and future-proof the property against tightening regulations.

What to prepare before you apply for a commercial mortgage

• Last 2–3 years’ accounts and the latest management figures

• Cash-flow forecast showing comfortable repayment cover

• Details of existing debts and repayment schedules

• Business plan explaining the property’s role and your growth plans

• For investments: tenancy schedule, lease terms, rent level vs market, and evidence of tenant strength

• Evidence of deposit and source of funds

• ID, KYC and AML documents

Whether you’re buying your first premises or refinancing a portfolio, the basics remain the same: understand what drives rates, prepare your finances, and compare offers carefully. With the right planning and a strong application, you’ll be in a better position to secure a commercial mortgage that supports your business for the long term.