Published and reviewed 20 October 2026. General information, not advice. Figures are illustrations, not lender quotes.
The short version
- Most mainstream commercial mortgages are priced at about 6% to 9% a year in October 2026. Strong owner-occupiers at low loan to value sit at the bottom of that range, and specialist buildings, weaker credit or small, complex loans can go above it.
- A tracker rate is Bank Rate plus a margin. With Bank Rate at 3.75%, margins of about 2% to 5.5% give rates of roughly 5.75% to 9.25%.
- A fixed rate is priced from swap rates, not Bank Rate. Five-year swaps rose to about 4.7% in early October 2026, a full point above Bank Rate, which is why fixes now cost more than many trackers.
- Each percentage point matters. On a £400,000 loan over 20 years, 7.5% instead of 6.5% adds about £240 a month, or about £57,600 over the full term.
- The rate is not the whole price. In our example, a lower rate with a 2% fee was the cheaper deal over five years, but the dearer one if the company sold after two.
Commercial mortgage rates today
There is no single commercial mortgage rate. Each lender prices each loan, so the useful questions are what the market range is, where your business and building are likely to fall in it, and what that means in pounds. This table sets out the reference rates that every commercial mortgage is priced from, and the ranges we see in published lender rates and market data in October 2026.
| Measure | Level | What it tells you |
|---|---|---|
| Bank of England Bank Rate | 3.75% | Held on 17 September 2026 by six votes to three, with three members voting for a rise to 4%. The next decision is due on 5 November 2026. Tracker and variable rates move with it. |
| SONIA | About 3.73% | The overnight rate banks pay each other. Some larger loans are priced as a margin over SONIA instead of Bank Rate. |
| Five-year swap rate | About 4.7% | The market cost of fixing money for five years. It rose from about 4.35% to 4.7% in the month to early October 2026. Five-year fixed rates are built on top of it. |
| Average rate on new loans to businesses | 5.57% | The Bank of England average for new bank loans to private non-financial companies in August 2026. It includes large corporate loans, so most smaller commercial mortgages are priced above it. |
| Typical five-year fixed commercial mortgage | About 6% to 9% | Mainstream owner-occupied and investment loans. Lower loan to value, strong trading or tenants and simple buildings sit at the lower end. |
| Typical tracker or variable | Bank Rate plus about 2% to 5.5% | That is about 5.75% to 9.25% today. Some loans carry a minimum rate, called a floor. |
| Specialist, complex or adverse credit | 9% and above | Pubs, leisure, land, short trading records or credit problems narrow the lender list and lift the margin. |
These ranges are a guide, not a quote. A lender may price your loan above or below them, and a rate shown in an advert or a table may depend on conditions such as holding your business current account with the lender.
An example of published lender rates
Most high street banks do not publish commercial mortgage rates and price each case individually. Some challenger banks do. Allica Bank’s published five-year fixed rates, checked on 20 October 2026, show how the property type and loan to value move the price.
| Property and use | Up to 65% LTV | Over 65% LTV | Variable margin over Bank Rate |
|---|---|---|---|
| Owner-occupied commercial | 6.50% | 6.85% | 2.30% to 2.65% |
| Owner-occupied semi-commercial | 6.00% | 6.75% | 1.80% to 2.55% |
| Commercial investment | 7.90% | 8.10% | 3.70% to 3.90% |
| Semi-commercial investment | 6.30% | 7.15% | 2.35% to 3.20% |
The lender states that these rates include a 0.50% discount for running the business current account with it, so without that account each rate would be about half a point higher. It also lists further 0.25% reductions for an EPC rating of A to C, loans over £750,000 and strong debt service cover. We show the table as an example of how pricing works, not as a recommendation, and rates can change at any time. Swap rates rose sharply after the page was last updated, so check the current figure with the lender.
Two patterns show up in almost every lender’s pricing. Owner-occupied loans are usually cheaper than loans on let investment property, because a trading business that needs its own building is a strong reason to keep paying. Our guide to commercial buy to let mortgages explains how lenders price and size loans on let property. And the step from one loan to value band to the next adds a fraction of a point to the whole loan, which matters more than it looks, as the example further down shows.
How a commercial mortgage rate is built
Every commercial mortgage rate has two parts: the lender’s cost of money, and a margin for the risk and work of your loan. Understanding which cost of money applies to your loan explains most of the rate movements you will read about.
Tracker and variable rates: Bank Rate or SONIA plus a margin
A tracker is set at a fixed margin above a reference rate, usually Bank Rate and sometimes SONIA for larger loans. If the margin is 2.50% and Bank Rate is 3.75%, you pay 6.25%. When Bank Rate changes, your rate changes by the same amount, usually from the next payment. A lender’s own standard variable rate is different: the lender can change it at its discretion, so it does not have to follow Bank Rate exactly.
Fixed rates: the swap rate plus a margin
A lender that fixes your rate for five years usually hedges its own funding for the same period in the interest rate swap market. The five-year swap rate is the price of that hedge, so it is the floor that five-year fixed rates are built on. Two-year and ten-year fixes are built on the swap rates for those periods.
Worked example: building a five-year fix
- Cost of fixing for five years: about 4.70%, the five-year swap rate in early October 2026.
- Lender margin: about 1.5% to 3.5% for a mainstream commercial mortgage, depending on the risk.
- Result: a five-year fixed rate of roughly 6.2% to 8.2%, in line with the published rates above.
The same loan as a tracker at Bank Rate plus 2.50% would start at 6.25%. Today the fix and the tracker cost about the same at the start, because markets expect rates to stay near or above current levels. The fix buys certainty. The tracker keeps flexibility and avoids large break costs, but carries the risk of rises.
This is why fixed rates can move between Bank of England decisions. Swap rates react to inflation data, government borrowing and market expectations every day. When gilt yields rose in September 2026, lenders repriced fixed rates upwards even though Bank Rate did not change. It is also why a lender may only hold a fixed rate for a limited time after it issues an offer.
What goes into the margin
- Loan to value: the less the lender would need to recover from a sale, the lower the margin.
- The income: for an owner-occupier, years of steady profit and comfortable debt service cover. For an investor, the length of the lease and the strength of the tenant.
- The building: modern offices, warehouses and industrial units in good locations are easier to sell than pubs, hotels, petrol stations or buildings with a single use.
- The people: the credit history of the company and its directors, property experience and the strength of any personal guarantee.
- Size and complexity: small loans cost the lender almost as much to arrange as larger ones, so they tend to carry a higher margin. Very large loans are often priced more keenly.
- The relationship: some lenders discount the rate if you move your business current account or other borrowing to them.
- Energy performance: a growing number of lenders cut the rate for buildings with a good EPC rating.
Our guide to business loan interest rates explains lender pricing across all types of business finance, including unsecured loans and asset finance.
Rates by property type, loan to value and borrower
The table below shows where different loans tend to sit relative to each other. Use it to place your own loan in the range, not as a price list.
| Factor | Usually priced lower | Usually priced higher |
|---|---|---|
| Use of the building | Owner-occupied by an established trading business | Investment property let to tenants, especially short leases or a single weak tenant |
| Loan to value | 60% or less | 70% to 75%, the top of most lenders’ range |
| Property type | Offices, industrial units, warehouses, shops in strong locations, semi-commercial with a good residential element | Pubs, hotels, leisure, care homes, petrol stations, land and buildings needing work |
| Trading record | Three or more years of filed accounts with steady profits | Under two years, losses or falling profits |
| Cover | Earnings or rent well above the repayments | Earnings or rent only just above the lender’s minimum |
| Credit history | Clean company and director records | Recent missed payments, defaults or County Court Judgments |
| Loan size | Larger loans, often £750,000 or more | Small loans under about £150,000 |
Why the last slice of the loan is the dearest
When a bigger loan moves you into a higher loan to value band, the higher rate applies to the whole loan, not just the extra borrowing. That makes the last slice far more expensive than the headline rate suggests.
Worked example: 65% or 75% of a £600,000 building
These are assumptions for the illustration: an owner-occupied unit, a 20-year capital repayment term, 6.50% up to 65% loan to value and 6.85% above it.
- 65% loan to value: £390,000 at 6.50% costs about £2,908 a month, with about £25,060 of interest in the first year.
- 75% loan to value: £450,000 at 6.85% costs about £3,448 a month, with about £30,490 of interest in the first year.
- The extra £60,000 adds about £5,430 of first-year interest. That is about 9% a year on the extra borrowing, even though neither headline rate is above 7%.
If the business has the cash, putting in a larger deposit can be a better use of it than it looks. If it needs the cash for working capital, the 75% loan may still be right, but compare it with other ways to fund the gap.
Fixed, tracker or variable: which to choose
| Rate type | How it works | Suits | Watch for |
|---|---|---|---|
| Fixed | The rate is set for an agreed period, commonly 2, 3, 5 or 10 years, then usually reverts to a variable rate. | Businesses that need certain repayments, or where cover is tight. | Early repayment charges or break costs for the whole fixed period. Ask what happens at the end of the fix. |
| Tracker | A fixed margin above Bank Rate or SONIA, so the rate moves when the reference rate moves. | Borrowers who may sell, refinance or overpay, or who can absorb rises. | Payments rise with Bank Rate. Many trackers have a floor, a minimum rate even if Bank Rate falls. |
| Standard variable | The lender’s own rate, which it can change. | Short periods, for example after a fix ends while you arrange a new deal. | The lender sets it, so it can rise even when Bank Rate does not. |
| Variable with a hedge | A variable loan with a separate swap or cap that limits the rate. | Larger loans, often from banks. | The hedge is a separate contract with its own costs. Breaking a swap early can cost a lot, or occasionally pay out. |
Stress-test a tracker before you choose it
Worked example: a one-point rise on a £400,000 tracker
A £400,000 loan over 20 years at Bank Rate plus 2.50%, so 6.25% today, costs about £2,924 a month. If Bank Rate rose by one percentage point to 4.75%, the rate would be 7.25% and the payment about £3,162 a month. That is about £240 a month, or about £2,850 a year, more.
Check that the business could pay that from its normal cash flow. Check the cover covenant too. If the facility letter requires earnings or rent to cover the repayments by a set ratio, a rate rise can breach it even when every payment is made on time.
Match the fix to your plans
A five-year fix on a building you may sell or refinance in two years can lock in a large charge. Many commercial fixes use a sliding scale, such as 5% of the balance in year one falling by 1% a year. On our £400,000 example, a 3% charge in year three on a balance of about £378,600 would be about £11,360. Some lenders charge the actual cost of breaking their swap instead, which can be higher or lower depending on how rates have moved. Ask for an example in pounds before you sign.
What commercial mortgage rates cost each month
This ready reckoner shows the monthly repayment for every £100,000 borrowed. Multiply by your loan in hundreds of thousands. For a £350,000 loan, multiply by 3.5.
| Interest rate | 15 years | 20 years | 25 years | Interest only |
|---|---|---|---|---|
| 5.5% | £817 | £688 | £614 | £458 |
| 6.0% | £844 | £716 | £644 | £500 |
| 6.5% | £871 | £746 | £675 | £542 |
| 7.0% | £899 | £775 | £707 | £583 |
| 7.5% | £927 | £806 | £739 | £625 |
| 8.0% | £956 | £836 | £772 | £667 |
| 9.0% | £1,014 | £900 | £839 | £750 |
Figures are capital repayment unless shown as interest only, with the annual rate divided into 12 equal monthly rates and the rate fixed for the whole term. They exclude fees. Lenders that calculate interest daily or quarterly will show slightly different figures.
Monthly payments on common loan sizes
| Loan | At 6.5% over 20 years | At 6.5% over 25 years | At 7.5% over 20 years | Interest only at 6.5% |
|---|---|---|---|---|
| £250,000 | £1,864 | £1,688 | £2,014 | £1,354 |
| £500,000 | £3,728 | £3,376 | £4,028 | £2,708 |
| £1,000,000 | £7,456 | £6,752 | £8,056 | £5,417 |
On a £400,000 loan over 20 years, the difference between 6.5% and 7.5% is about £240 a month, about £2,880 a year and about £57,600 over the full term. That is why a quarter or half a point is worth negotiating for. Run your own figures in the commercial mortgage calculator.
The rate is not the price: fees and true cost
Two offers with different rates and fees can only be compared over the period you expect to keep the loan. Most commercial mortgages come with some or all of these costs.
- Arrangement fee: often 1% to 2% of the loan, sometimes a flat fee on smaller loans. If it is added to the loan, you pay interest on it too.
- Valuation fee: paid to the lender’s valuer whether or not the loan goes ahead.
- Legal fees: for your solicitor and, usually, the lender’s.
- Broker fee: if you use a broker. Ask whether a lender also pays them commission.
- Early repayment charges or break costs if you repay during a fixed period.
- Exit fee: uncommon on term loans but worth checking.
Worked example: lower rate or lower fee?
A company is borrowing £400,000 over 20 years on a five-year fix. These are illustrative offers, not quotes.
| Offer A | Offer B | |
|---|---|---|
| Rate and fee | 6.25% with a 2% fee (£8,000) | 6.75% with a 0.75% fee (£3,000) |
| Monthly payment | £2,924 | £3,041 |
| Interest and fee over five years | £124,411 | £129,190 |
| Balance still owed after five years | £340,988 | £343,703 |
| Effective annual cost if kept for five years | About 6.97% | About 7.16% |
| Effective annual cost if repaid after two years | About 7.61% | About 7.40% |
Kept for the full five years, Offer A is cheaper by about £7,500 once the lower balance is counted. If the company sells or refinances after two years, the bigger fee has less time to pay for itself and Offer B becomes the cheaper loan. The effective annual cost spreads the fee over the time you hold the loan, which is the fairest way to compare the two.
Our guide to commercial mortgage quotes compares three quotes on the same loan, including early repayment charges, and our guide on how to compare business loans sets out the full like-for-like checklist.
How the rate changes how much you can borrow
The rate does not just set the monthly payment. It also sets the loan size, because lenders test affordability at the rate, and often at a stressed rate above it.
- Investment property: lenders usually want the rent to cover the interest by a ratio, commonly 125% to 150%, at a stressed rate.
- Owner-occupied property: lenders compare the business’s earnings with the yearly repayments, often wanting cover of around 1.25 to 1.5 times.
Worked example: rent of £36,000 and a 125% cover test
- Stressed at 7%: £36,000 divided by 1.25, divided by 7%, supports a loan of about £411,400.
- Stressed at 8%: the same rent supports only about £360,000.
One percentage point on the stress rate takes about £51,400 off the loan. When swap rates rise, investors often find the rent rather than the loan to value is what limits the loan. Our guide on how to get a commercial mortgage works through both lender tests in full.
How to get a lower commercial mortgage rate
You cannot change Bank Rate or swap rates, but most of the margin is within your influence. These are the levers that usually make the biggest difference.
- Bring the loan to value down a band. Getting under 65% or 60% can lower the rate on the whole loan, as the £600,000 example shows.
- Show strong, recent figures. Up-to-date management accounts, filed accounts on time and a clear cash flow forecast reduce the lender’s uncertainty, and uncertainty is priced.
- Improve the cover. For an owner-occupier, show the rent you will stop paying once you own the building. For an investor, longer leases and stronger tenants help.
- Tidy up credit records. Check the company’s and directors’ credit files before you apply, and be ready to explain any past problems briefly and with evidence that they are resolved.
- Ask about relationship and green discounts. Some lenders cut the rate if you bank with them or if the building has a good EPC rating. Weigh the saving against the cost of moving your banking.
- Compare more than one lender. Banks, challenger banks and specialist lenders price the same case very differently. A building one lender sees as specialist may be mainstream to another.
- Choose the fix length carefully. A shorter or longer fix may be priced differently on the same day, because each is built on a different swap rate.
- Negotiate the fee and the charges, not just the rate. Arrangement fees, early repayment terms and floors are often more negotiable than the headline rate.
Our borrowing checklist covers the preparation that applies to any business finance application.
Why commercial rates are higher than residential
In August 2026 the Bank of England average rate on new secured lending to households, mostly home mortgages, was 4.60%. Most commercial mortgages cost more for several reasons.
- Each loan is underwritten individually. There is no mass-market pricing, and the cost of assessing a business and a building is spread over fewer, larger loans.
- Commercial property is harder to sell. Values move more with the economy, and some buildings suit only a narrow range of buyers.
- Business income is less predictable than a salary, and rent depends on tenants staying and paying.
- Lenders hold more capital against commercial property lending, and that cost is passed on.
The gap is not fixed. A strong owner-occupier borrowing at a low loan to value may be offered a rate close to a residential fix, while a residential buy-to-let through a company can be priced above some commercial loans.
Are commercial mortgage rates going down?
No one can say with certainty, and you should be wary of anyone who does. What can be said, as of 20 October 2026, is this.
- Bank Rate has been 3.75% since December 2025. At the September 2026 decision, three of the nine members of the Monetary Policy Committee voted for a rise to 4%, and the Bank said the risks to inflation were tilted to the upside. Consumer price inflation was 3.1% in August 2026.
- Fixed-rate costs rose in September and early October. Five-year swap rates moved from about 4.35% to 4.7% in a month, and the average five-year residential fix reached 6% for the first time since 2023. Some commercial lenders had cut rates earlier in the year, but new fixed rates now cost more than they did in the summer.
- Credit for smaller firms tightened slightly. Lenders in the Bank of England’s Credit Conditions Survey for the third quarter of 2026 reported less credit available to small businesses, and expected the same in the fourth quarter.
In practice, waiting for rates to fall is a gamble. If you are buying, base the decision on whether the deal works at today’s rate with room for a rise. If you are refinancing, start about 12 months before your current deal ends so you can choose the timing. Our commercial remortgage guide covers when switching pays.
Tax relief and regulation
Is commercial mortgage interest tax deductible?
For a limited company borrowing for its business, interest is usually deductible from taxable profits for corporation tax, and so are many of the costs of arranging the loan. Capital repayments are not deductible. Groups with more than £2 million a year of net interest may have relief limited by the corporate interest restriction. The treatment depends on your circumstances, so check with your accountant before relying on it.
Is a commercial mortgage regulated?
Usually not in the way a home mortgage is. A loan to a limited company secured on commercial property is generally outside the Financial Conduct Authority’s mortgage rules. A loan to an individual or trustees secured on property that is at least 40% used as their home, or a close family member’s, is a regulated mortgage contract, which can catch some semi-commercial buildings. Many banks follow the Lending Standards Board’s Standards of Lending Practice for business customers, and some smaller businesses can take complaints to the Financial Ombudsman Service. Check any firm you deal with on the FCA Register.
Outside regulation, the facility letter is your protection. Read the rate type, the margin, any floor, the fees, the early repayment terms and the covenants, and have a solicitor go through it before you sign.
Where Business Loan Advice fits
We are not a lender and we do not give personal advice. We are preparing a service that will introduce UK limited companies directly to lenders, including for commercial mortgages. No lenders are confirmed yet, so we cannot currently obtain quotes or make introductions. You will not pay us a fee. If a lender pays us commission after the service launches, we will tell you before asking your permission to refer you.
In the meantime, the commercial mortgage calculator and these guides are free to use with no sign-up. If your limited company is planning a property purchase or refinance, you can register its interest and we will contact you about the service launch. Read how we are paid for the details.
Common questions
What are commercial mortgage rates in the UK right now?
In October 2026 most mainstream commercial mortgages are priced at about 6% to 9% a year. Trackers are usually Bank Rate, currently 3.75%, plus about 2% to 5.5%. Five-year fixes are built on five-year swap rates of about 4.7% plus the lender’s margin. Specialist property or credit problems can push the rate higher.
How are commercial mortgage rates calculated?
Each rate is the lender’s cost of money plus a margin. For a tracker the cost of money is Bank Rate or SONIA. For a fixed rate it is the swap rate for the fixed period. The margin reflects the loan to value, the income, the property, the borrower’s credit and the size of the loan.
Are commercial mortgage rates higher than residential?
Usually. In August 2026 the Bank of England average rate on new secured household lending was 4.60%, while most commercial mortgages cost about 6% or more. Commercial loans are individually underwritten, the property is harder to sell and business income is less predictable.
What is the monthly payment on a £500,000 commercial mortgage?
At 6.5% over 20 years, about £3,728 a month on capital repayment, or about £3,376 over 25 years. Interest only at 6.5% would be about £2,708 a month, but the full £500,000 would still be owed at the end. Fees are extra.
Can I get a fixed-rate commercial mortgage?
Yes. Many lenders offer fixes of two, three, five and sometimes ten years. A fixed rate gives certain repayments but usually carries early repayment charges or break costs if you repay, sell or refinance during the fixed period.
Is a fixed or tracker commercial mortgage better?
Neither is better in general. A fix suits a business that needs certain repayments or has tight cover. A tracker suits one that may sell or refinance early or can absorb rises. In October 2026 fixes and trackers start at similar rates, so the choice is mainly about certainty against flexibility.
Which bank has the lowest commercial mortgage rates?
No lender is cheapest for every case. High street banks often price individually, challenger banks publish rate tables, and specialist lenders take on buildings and borrowers others will not. The cheapest offer depends on your property, loan to value and figures, so compare more than one lender on total cost.
How can I get a lower commercial mortgage rate?
Reduce the loan to value below a pricing band, show strong recent accounts and comfortable cover, clean up credit records and compare several lenders. Ask about discounts for banking with the lender or for a good EPC rating, and negotiate the fees and early repayment terms as well as the rate.
Can I get a commercial mortgage with bad credit?
Sometimes. Specialist lenders consider past credit problems, especially if they are resolved and explained, the loan to value is lower and the income is strong. Expect a higher rate and fewer options than for a clean record.
Will commercial mortgage rates go down?
No one knows. Bank Rate has been 3.75% since December 2025, and in September 2026 three of nine Bank of England policymakers voted for a rise. Swap rates, which set fixed rates, rose in September and early October. Base decisions on whether the loan works at today’s rate with room for a rise.
Is commercial mortgage interest tax deductible?
For a limited company borrowing for its business, interest is usually deductible for corporation tax, but capital repayments are not. Large groups may be affected by the corporate interest restriction. Check the treatment with your accountant.
What fees come with a commercial mortgage?
Typically an arrangement fee of about 1% to 2% of the loan, a valuation fee, legal fees for both sides and a broker fee if you use one. Fixed rates may carry early repayment charges. Compare offers on the total cost over the time you expect to keep the loan.
What is a floor on a commercial mortgage?
A minimum interest rate written into a tracker or variable loan. If Bank Rate falls below the level that would take your rate under the floor, you keep paying the floor rate. Check for one before choosing a tracker in the hope that rates fall.
Bank of England: Monetary Policy Summary, September 2026, Bank Rate held at 3.75%
Bank of England: Bank Rate and how it is set
Bank of England: upcoming Monetary Policy Committee dates
Bank of England: the SONIA interest rate benchmark
Bank of England: effective interest rates, August 2026
Bank of England: Credit Conditions Survey, 2026 Q3
Mortgage Professional (MPA): swap rates and Moneyfacts average fixed rates, 5 October 2026
Allica Bank: commercial mortgage rates, an example of a published lender rate table
GOV.UK: restriction on corporation tax relief for interest deductions
FCA Handbook PERG 4.4: what is a regulated mortgage contract
FCA Register: check a firm’s authorisation
Lending Standards Board: the Standards of Lending Practice
Financial Ombudsman Service: who can complain
Rates, tax bands and lender criteria change. Confirm the current details with the lender, your solicitor or your accountant before relying on them.