Commercial Mortgage Rates Explained
Sam Griffin
Commercial mortgage rates vary more than residential rates, and understanding what drives that variation is useful whether you are about to apply or simply forming a view of what to expect. The rate you are offered will reflect the lender's assessment of the property, how much you are borrowing relative to its value, and the financial strength of your business.
What rates look like in 2026
Commercial mortgage rates in the UK currently start from around 5.5% for the strongest applications, typically those with deposits above 35% and clean business financials. Most standard commercial borrowers will see rates in the range of 6% to 8.5% APR. Applications involving specialist property types, higher LTVs, or more complex business profiles can sit higher, up to 9.5% or beyond.
These rates are based on the Bank of England base rate of 3.75%, to which lenders add a margin that reflects their assessment of the risk and the cost of their funding. A variable rate quoted as base rate plus 2.5% translates to 6.25% at current levels, but would move if the base rate changes. For context on how these rates compare to other forms of secured business lending, see secured vs unsecured business loans.
Fixed vs variable rates
Fixed-rate commercial mortgages lock your interest rate for a set period, typically two to five years, sometimes longer. Your monthly payment does not change during the fixed period regardless of what happens to the base rate. This gives certainty on outgoings, which is valuable if your business operates on tighter margins or needs to plan cash flow precisely.
Variable-rate commercial mortgages track the Bank of England base rate or the lender's standard variable rate. If base rate falls, your payment falls. If it rises, your payment rises. Some businesses prefer this if they expect rates to come down over the medium term, or if they may want to repay early without incurring a fixed-rate early repayment charge.
There is no universally correct choice. If predictability matters more than chasing a lower rate, fixed is the simpler option. If flexibility matters more, variable keeps your options open.
What affects your rate
Commercial mortgage rates are highly bespoke. The main factors that drive the rate you are offered are:
LTV is the biggest single variable. A 60% LTV application will almost always attract a lower rate than a 75% LTV application, because the lender is taking less risk relative to the property value. If you can increase your deposit, the rate improvement is often material.
Property type matters. Standard commercial premises such as offices, retail units, and warehouses are well understood by lenders and attract standard pricing. Specialist assets such as pubs, care homes, hotels, and petrol stations are harder to sell quickly in a default scenario, so lenders apply a higher margin to reflect that risk.
Business financials are assessed in detail. Strong turnover, consistent profitability, and a track record of meeting financial obligations will push your rate lower. Recent losses, thin margins, or a short trading history will push it higher.
Credit history affects pricing at the margin. A clean profile with no CCJs or defaults will attract better terms. Adverse credit does not automatically disqualify you, particularly if the LTV is low enough, but it will affect the rate you are offered.
Loan size can also have an effect. Smaller commercial mortgage applications sometimes attract higher rates because the fixed costs of administration are proportionally larger. Larger loans may attract keener pricing, particularly from specialist lenders.
How your rate compares to other secured business lending
Commercial mortgages typically sit at the lower end of the secured business lending rate spectrum. The security, commercial property, is a well-understood asset class with an established resale market. And the loan terms are long, which gives the lender a sustained income stream that reduces the margin they need to charge.
Shorter-term secured business loans backed by the same property type would typically carry a higher rate. Unsecured business lending would be higher still. For a broader picture of where commercial mortgage rates sit relative to secured and unsecured business finance, see our guide to what is a secured business loan and our comparison of unsecured vs secured business loans.
Frequently asked questions
Is it worth paying for a broker to get a better commercial mortgage rate?
In most cases, yes. Commercial mortgage pricing is not standardised, and many specialist lenders who offer the most competitive terms do not deal directly with borrowers. A broker with established lender relationships will often access better pricing than a direct application. On a significant loan, the rate saving typically outweighs the broker fee.
How often do commercial mortgage rates change?
Variable rates change whenever the Bank of England base rate changes, which happens at each Monetary Policy Committee meeting, typically every six weeks. Fixed rates are set at the time your offer is issued and do not change during the fixed period.
Can I negotiate a commercial mortgage rate?
Yes, particularly through a broker with a lender relationship. Commercial mortgage pricing is more negotiable than residential pricing because the deals are larger, the lender relationships are ongoing, and the underwriting is bespoke. A strong application with a low LTV puts you in a reasonable position to negotiate.
What is an arrangement fee and is it negotiable?
An arrangement fee is charged by the lender for setting up the commercial mortgage, typically 1% to 2% of the loan amount. It is sometimes negotiable, particularly for larger transactions. It can be added to the loan rather than paid upfront, though this increases the total interest cost over the term.
Where can I find out more about how commercial mortgages work?
For a walkthrough of the application, valuation, and legal process, see our guide to how commercial mortgages work. For a broader introduction to what commercial mortgages are and what they are used for, see what is a commercial mortgage.
This article is for informational purposes only and does not constitute financial advice. Always seek independent advice before making financial decisions.
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