Guide
Commercial Mortgage Rates Explained for UK SMEs
This page was drafted with AI and published automatically after automated checks, before we stopped doing this on 9 October 2026. It had an AI-assisted check on 9 October 2026, but it has not yet been reviewed by a person.
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A commercial mortgage rate is either fixed for a set term or a lender's margin over the Bank of England base rate, which is 3.75%, last changed on 18 December 2025. On Allica Bank's published table, a business buying its own premises at up to 65% loan-to-value pays 6.50% fixed for five years, or base rate plus 2.30% (6.05% today) on a variable rate; an investment property costs 7.90% fixed. Shawbrook advertises rates from 5.29%.
How commercial mortgage rates are structured
A variable rate is the lender's margin added to the base rate, so it moves when the Bank of England changes the base rate. Allica explains its variable rates this way: the figure it publishes is its margin above the base rate. A fixed rate stays the same for the fixed term; Shawbrook, for example, offers 2, 3, 5 and 10 year fixed rates as well as variable rates.
There is no regulator's rate table for commercial mortgages, and most lenders quote case by case. For the product itself, ticket sizes and who lends, see our commercial mortgages page.
Published commercial mortgage rates, October 2026
Checked on 9 October 2026 on each lender's own page. Allica says every rate in its tables, fixed and variable, includes its 0.50% current account discount, which it gives owner-occupiers who bank at least half their turnover with it, for the first five years. The variable column is its margin over base rate, with the total at today's 3.75% base rate shown in brackets.
| Lender and loan type | Loan-to-value | 5-year fixed | Variable (margin over base) | Source |
|---|---|---|---|---|
| Allica: owner-occupied | Up to 65% | 6.50% | 2.30% (6.05%) | Allica |
| Allica: owner-occupied | Over 65% | 6.85% | 2.65% (6.40%) | Allica |
| Allica: owner-occupied semi-commercial | Up to 65% | 6.00% | 1.80% (5.55%) | Allica |
| Allica: commercial investment | Up to 65% | 7.90% | 3.70% (7.45%) | Allica |
| Allica: commercial investment | Over 65% | 8.10% | 3.90% (7.65%) | Allica |
| Shawbrook: commercial and semi-commercial | Up to 75% | Rates from 5.29% | Variable available | Shawbrook |
For the wider market, Allica's own summary puts commercial mortgage rates at 6.0% to 9.5% fixed, or base rate plus 2.0% to 5.5% variable. A "from" rate like Shawbrook's is the lowest rate the lender offers, not the rate every borrower gets.
What moves your rate
Allica's table and discount list show the main levers in numbers:
- Loan-to-value: going above 65% adds 0.35 points to the owner-occupied rate (6.85% against 6.50% fixed).
- How the property is used: letting it to a tenant rather than trading from it adds 1.40 points (7.90% investment against 6.50% owner-occupied, both up to 65%).
- Discounts: Allica takes 0.25 points off for an EPC rating of A to C, 0.25 for loans over £750,000, and 0.25 if you can show debt service cover of 200% at application (Allica). The 0.50 current account discount is already inside its published rates.
- Debt service cover: Allica says minimum debt service cover is usually around 130%. Debt service cover compares the income available to pay the loan with the repayments, so 130% means about £1.30 of income for every £1 due.
Worked example: £585,000 on a £900,000 office
A trading limited company buys its own office for £900,000 and borrows £585,000: £585,000 / £900,000 = 65% loan-to-value, the top of Allica's lower band. Repaid over 25 years (all figures our calculations from Allica's published rates):
- 5-year fixed at 6.50%: about £3,950 a month, or £47,400 a year.
- Without the 0.50% current account discount, if the company does not bank with Allica (our calculation: 6.50% + 0.50% = 7.00%): about £4,135 a month, £49,616 a year.
- Variable at base plus 2.30% (6.05% today): about £3,787 a month. If base rate rose by 0.25 points to 4.00%, the rate would be 6.30% and the payment about £3,877.
- Interest-only at 6.50%: £585,000 x 6.50% = £38,025 a year.
At around 130% debt service cover, the company needs about £61,620 a year available to service the fixed-rate loan (£47,400 x 1.3). This is an illustration, not a quote. Monthly payments use the standard repayment formula on 300 monthly instalments, and fees are not included.
Fixed or variable
A fixed rate costs more today on Allica's table (6.50% against 6.05% variable for an owner-occupier up to 65%) but holds the payment steady for the term. A variable rate is cheaper now and moves with every base rate change. Before choosing a fix, ask what early repayment charges apply if you sell or refinance inside the fixed term; they vary by lender and product.
Fees on top of the rate
Expect an arrangement fee, a commercial valuation, your own solicitor and the lender's legal costs, and any intermediary fee if you use one. Ask each lender for its tariff of fees and compare offers on the total cost over the term you expect to keep the loan, not on the headline rate alone.
Who a commercial mortgage suits, and who it does not
Suits
- Trading companies buying their own premises with a deposit of 25% to 35% or more.
- Investors refinancing let commercial property whose rent covers the repayments comfortably.
- Owners who want long-term borrowing, with terms of 3 to 25 years at Shawbrook.
Does not suit
- A purchase that must complete faster than a valuation and legal work allow: bridging finance is the usual short-term route.
- Building or converting rather than buying finished property: see development finance.
- Loans under £150,000, the starting point at Shawbrook: an unsecured business loan may fit a smaller need.
Common questions about commercial mortgage rates
Is it difficult to get a commercial mortgage?
It takes more paperwork than a residential mortgage, but a trading business with filed accounts and a clear case is a normal borrower. Lenders look at the loan-to-value (Shawbrook goes up to 75%), whether the income covers the repayments (Allica says cover of around 130% is usual) and the business's accounts and credit record. It gets harder with a short trading history, a specialist property, impaired credit or income that only just covers the repayment.
Is a 4 percent commercial mortgage rate good?
It would be well below the published market. The base rate alone is 3.75%, Allica's lowest published variable margin is 1.80% (5.55% in total) and Shawbrook's lowest advertised rate is 5.29%. If you are quoted around 4%, check whether it is a residential product, an introductory rate that resets, or a margin quoted without the base rate added.
Frequently asked questions
What is the minimum deposit required for a UK commercial mortgage?
It depends on the lender and the property. Shawbrook lends up to 75% loan-to-value on commercial and semi-commercial mortgages, so the smallest deposit there is 25% of the value. Allica prices loans above 65% loan-to-value higher than those below it, so a 35% deposit gets a better rate. A lower loan-to-value almost always means a lower rate.
Can a limited company take out a commercial mortgage in its own name?
Yes. Shawbrook, for example, lends commercial mortgages to limited companies, LLPs, individuals, ex-pats and trusts. Lenders will look at the company's filed accounts and how well its income covers the repayments, and many ask the directors for a personal guarantee as well as the charge over the property.
How long does a commercial mortgage application take to complete?
Longer than a residential mortgage, because the lender needs a commercial valuation and both sides' solicitors need to complete their legal work before the money is released. The valuation and legal work are usually the longest stages. Ask the lender for its timetable at the start, and have your accounts, bank statements and any leases ready before you apply.
Are commercial mortgage rates regulated by the FCA?
A commercial mortgage to a limited company is not a regulated mortgage contract. That definition covers credit to an individual or trustees secured on land of which at least 40% is used, or intended to be used, as a dwelling (article 61 of the Regulated Activities Order). A loan to an individual on a mixed-use property with a flat can fall inside it, so check with the lender if that applies to you.
Can I refinance an existing commercial mortgage to release equity?
Yes. Lenders such as Shawbrook offer commercial mortgages to refinance as well as to buy. The new lender values the property as it is now, so if it has gone up in value you may be able to borrow more while keeping the loan-to-value within the lender's limit. A new valuation and legal work are needed, and the lender's fees apply.
By Adam Parker, Founder & Managing Director, Muswell Rose. FundBiz is owned and operated by Best Business Loans Ltd, directed by Oliver Mackman. AI-assisted check .