Current commercial mortgage rates in the UK: what business owners need to know

Buying a commercial property is a big step, and securing the right commercial property finance is key to making it work for your business. If you’re like most business owners, you’ll want to know you’re getting the best deal possible. But with commercial mortgage rates varying by as much as 9%, how do you know which option is right for your business?

Currently, commercial mortgage rates are settling back down after a rocky few years. And the Bank of England base rate has fallen from 5.25% earlier in 2025, which means commercial mortgage rates are broadly falling too – good news if you’re looking to borrow.

Choosing the right commercial mortgage isn’t just about the base rate (you’ll want to factor fees and other aspects too) but it’s a good place to start.

Whether you’re buying your first office, expanding to a new warehouse, or refinancing an existing loan, getting the best possible commercial mortgage rate can make all the difference.

In this article, we’ll explain what commercial mortgage rates currently look like, how lenders decide what to charge you, the different types of rates (and which might suit your business best).

Key points:

• Commercial mortgage rates affect your monthly repayments, total interest costs, and cash flow

• You’ll also want to consider fees, flexibility, and suitability when comparing deals

• Funding Options by Tide can help when optimisation of working capital isn’t enough, offering access to business finance up to £20 million

What are current commercial mortgage rates in the UK?

As of August 2025, fixed rate commercial mortgages in the UK range from around 5.80% to 11.24%.

Variable rates commercial mortgages can be cheaper, but they move with the Bank of England base rate. So if rates go up, your payments go up too.

The exact interest rate you could get will depend on a range of factors, including:

• The type of property being financed

• Whether the property’s owner-occupied or an investment

• Your business’s credit profile and business financials

• The amount of deposit you put down

• The lender's risk assessment and terms

Rates can also vary by the type of commercial mortgage you choose. For example, you may find rates differ across all these products:

• Standard commercial mortgage

• Owner-occupied mortgage

• Commercial investment mortgage

• Buy-to-let mortgage

• Semi-commercial mortgage

How are commercial mortgage rates set?

Each lender sets their commercial mortgage rates using different criteria and goals. They’ll typically consider the following:

• Your business’s financial health: Lenders want to see strong cash flow, a good trading history, and a solid business plan. If you’re a startup, they’ll dig deeper into your projections and may ask for a personal guarantee.

• The property: Lenders also consider the property’s value and rental potential – a prime city-centre office may be deemed lower risk than a small retail unit, for example.

• Loan-to-value (LTV) ratio: The bigger the deposit you put down (usually 25-40%), the lower your interest rate is likely to be.

• The lender’s appetite: High street banks, challenger banks, and specialist lenders all have different criteria. Some are more flexible but charge higher rates, while others are stricter but offer more competitive deals.

• The economy: Inflation, the Bank of England base rate, and global events can all influence commercial mortgage rates up or down.

How do commercial mortgage rates work?

Commercial mortgages work a lot like residential mortgages, but with some differences. You borrow a lump sum (e.g. £500,000) and repay it over a set term typically of between five and 25 years. The property itself acts as security for the lender, which is why they’re often more willing to lend than with unsecured loans.

The interest rate is influenced by several factors:

• Deposit amount: The more you put down, the lower your rate (up to a point, usually 60% loan-to-value). Most lenders ask for a deposit of 25-40%, but a larger deposit can help you secure a better deal.

• Term length: Longer terms mean lower monthly payments, but you’ll pay more in interest over time. Shorter terms cost less overall but come with higher monthly repayments.

• Fees: Arrangement fees (usually 1-2% of the loan), valuation fees (£1,500-£2,500+), and legal costs can all add to the total cost. But not all lenders will charge these. You may also have to pay an early repayment charge (ERC) if you pay off a fixed-rate mortgage early.

• Lender competitiveness: High street banks, challenger banks, and specialist lenders all offer different rates. Shopping around or using a broker can help you find the right deal for your business.

Types of commercial mortgage rates

Not all commercial mortgages are created equal. The type you choose should depend on your business, your plans for the property, and how much risk you’re comfortable with.

Fixed-rate mortgages are a popular choice since they give your business stability, which can be valuable when the economy feels unpredictable. You’ll pay the same rate for a set period (usually 2-10 years) so your monthly payments won’t change. But the downside is that if market rates fall, you’re stuck paying the higher rate unless you remortgage.

Variable-rate mortgages tend to be cheaper at first, but they come with more uncertainty. The interest rate moves with the Bank of England base rate, so if rates go up, your payments go up too. They can be a good option if you think rates might drop or if you’re planning to refinance or sell the property in the near future.

There are also mortgages tailored to how you’ll use the property:

Owner-occupied mortgages are for businesses buying their own premises. Because the lender sees this as lower risk, the rates are usually better.

Buy-to-let mortgages are for rental properties. Lenders focus on the rental income to make sure you can afford the loan, but the rates tend to be higher.

If you need something short-term, a bridging loan might be worth considering. They’re designed to ‘bridge’ a gap, like buying a new property before you’ve sold an old one. The rates are higher, but you get the money quickly, usually within a few weeks.

If you’re building or renovating, property development finance could be a better fit. Lenders look at the project’s potential value, rather than just your current finances, which can make it easier to get approved.

Commercial mortgage rates and tax

The interest you pay on a commercial mortgage is usually tax-deductible, so you can subtract it from your taxable profits and reduce your tax bill. It’s not a huge saving, but it’s sure to help.

There are other tax costs to think about too, such as stamp duty. You’ll pay this when you buy a property over £150,000 (as of August 2025). The amount will depend on the property’s value, so it’s worth calculating this in advance.

There may also be VAT to consider, since some commercial properties include VAT in the purchase price (others don’t). Always double-check so you’re not caught out by an unexpected bill.

If you sell the property later for more than you paid, you might also owe Capital Gains Tax. This is a tax on the profit you make from selling an asset. The rate depends on your overall income and whether you’re selling as an individual or a business.

Understanding the tax implications of commercial mortgage rates can be complex, so it’s worth speaking with an accountant who can help structure the loan in the most tax-efficient way – for example, if you’re buying through a limited company, the tax implications might be different than if you’re buying as an individual.

How to compare commercial mortgage rates

When comparing commercial mortgage rates, you’ll want to consider the following:

• Rate amount: Lower interest rates can result in lower interest paid over time, but they can often come with additional fees that may make them less competitive with higher rate deals

• Rate type: Fixed-rate mortgages offer stability, while variable rates can be cheaper initially but come with the risk of increases later on

But while it’s important to compare the interest rates of commercial mortgages, you’ll also need to factor in other aspects of the mortgage to make sure you’re choosing the most suitable deal for your business.

Also consider:

• Term length: The term of the mortgage (usually 5-25 years) affects your monthly payments and total interest. Longer terms usually result in lower monthly costs but higher overall interest.

• Fees: Arrangement fees, valuation fees, and legal costs can add thousands to the total cost so always ask for a full breakdown.

• Flexibility: Can you overpay or make early repayments without penalties?

• Eligibility criteria: Some lenders specialise in certain sectors or business sizes, so make sure you qualify before applying.

It’s important not to go with the lowest interest rate deal you see, as other aspects of the mortgage can make it less competitive overall. Use a comparison site or broker to explore all your options and find the right fit for your business.

How to secure the best commercial mortgage rate

There are several things you can try that might increase your chances of securing the most competitive commercial mortgage rate available:

• Improve your credit score: Lenders look at both your personal and business credit history. To improve it, pay bills on time, reduce any debt, and check your report for any issues.

• Provide a bigger deposit: The more you put down, the less risky you are to lenders and the more competitive rate you’re likely to receive. This generally applies up to about 40% deposit – beyond that, it doesn’t usually make a difference.

• Shop around: There are lots of lenders offering commercial mortgages, so shop around. You may find that challenger banks and specialist lenders offer better rates for your business niche.

• Prepare your paperwork: Lenders generally want to see your business accounts, tax returns, and a solid business plan. The smoother this process goes, the better your chances.

• Consider a broker: Commercial mortgage brokers know the market inside out and can negotiate on your behalf. Plus, they often have access to deals you won’t find yourself.

Alternatives to commercial mortgages

A commercial mortgage can be a great way to finance a property. But it’s not your only option. If you’re struggling to get approved or just want to explore all your options, you can consider the following alternatives:

• Bridging loans: These are short-term, high-interest loans designed to cover a gap in funding. They can be particularly useful if you need to move quickly (e.g. buying a new property before selling your current one).

• Asset finance: This lets you borrow against equipment or vehicles your business already owns. It’s a flexible option if you need to free up cash without taking on a traditional mortgage.

• Peer-to-peer lending: Instead of borrowing from a bank, this allows you to borrow from investors. The rates can vary, but the process is often faster and more flexible than traditional lending.

• Government-backed schemes: Some regions offer loans or grants specifically for property purchases. These can be a great option if you qualify, as they often come with lower rates or more favourable terms.

• Refinancing: If you already have a mortgage, switching lenders could help you secure a better rate or release equity tied up in your property.

Find business finance with Funding Options by Tide

Whether you’re looking for a standard business loan, a short-term business loan, or something a little more specialist, like auction finance for property developers, we’re one of the leading names in business finance in the UK, having helped facilitate over £1 billion in finance to more than 20,000 customers.

Checking if you’re eligible is free, only takes a few minutes, and while a full application would impact your personal or business credit score, checking eligibility won’t. Just submit your details via the link below to find out if you could be eligible to borrow up to £20 million.

Find business finance.

FAQs

What’s the average commercial mortgage rate in 2025?

As of August 2025, the average commercial mortgage rate is around 7%, but the rate you could get will depend on your business, the property, and the lender.

Can I get a commercial mortgage with bad credit?

It’s tougher, but not impossible. Specialist lenders might help, especially if you’ve got a solid business plan or a larger deposit. Expect higher rates, though.

How much deposit do I need for a commercial mortgage?

Most lenders ask for a 25-40% deposit. Generally, the more you can put down, the lower your rate and the less you’ll pay in interest over the initial term.

Are commercial mortgage rates higher than residential rates?

Yes, commercial mortgage rates are usually higher than residential rates. This is because commercial properties are seen as riskier investments. Residential mortgages often have lower rates and smaller deposits.

How long does it take to get a commercial mortgage?

It can take four to 12 weeks, depending on how complex your application is and how fast the lender moves. Having all your paperwork ready can speed things up.

Can I refinance a commercial mortgage?

Yes, commercial mortgages can often be refinanced. Refinancing can help you get a better rate, release equity, or switch to a more flexible deal. Just watch out for early repayment charges.

What fees are involved in a commercial mortgage?

You’ll pay arrangement fees (1-2% of the loan), valuation fees (£1,500+), legal fees, and sometimes broker fees. Always ask for a full breakdown before you commit.

What happens if I miss a payment?

Missing commercial mortgage payments can hurt your credit score and lead to extra charges. If you’re struggling, talk to your lender early as they might be able to help.

Can I get a commercial mortgage for a startup?

It’s often possible for startups to get a commercial mortgage but it is harder. You’ll need a strong business plan, a good deposit, and maybe a personal guarantee. Specialist lenders are often your best bet.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.