How commercial rates are set
Bank Rate and swap rates
Lenders' underlying funding costs are influenced by the Bank of England's Bank Rate for variable pricing, and by swap rates (a market measure of future interest rate expectations) for fixed pricing. These move over time and are outside any lender's or broker's control.
Lender funding and risk margin
On top of their funding cost, lenders add a margin that reflects the risk of the specific loan — the property, the tenant or business, the loan-to-value and the borrower's circumstances. This margin varies significantly between lenders and deals.
What moves your rate: LTV, sector, tenant, serviceability
- Loan-to-value (LTV) — a lower LTV generally supports more favourable pricing
- Sector and property type — some sectors are viewed as higher risk by individual lenders
- Tenant or business strength — a stronger covenant generally supports better pricing
- Serviceability — how comfortably the rental income or trading profit covers the debt
Owner-occupied vs investment pricing
Owner-occupied lending is assessed on the strength of the trading business, while investment lending is assessed on the rental income and lease. Lenders often price and structure these two categories differently, so it's worth being clear from the outset which category your application falls into.
Fixed, variable and interest-only
Commercial mortgages can be offered on a fixed rate, giving payment certainty for an agreed period, or a variable rate, which moves in line with the lender's reference rate. Some lenders also offer interest-only or part-and-part terms — see our dedicated interest-only commercial mortgages page for how these work and the risks involved.
Fees beyond the rate: arrangement, valuation, legal, broker, exit
- Arrangement fee — charged by the lender, often added to the loan or paid upfront
- Valuation fee — for the lender's independent assessment of the property
- Legal fees — for both the lender's and your own solicitor
- Any fee charged by the specialist adviser, which they will disclose to you
- Exit fee — some lenders charge a fee if you repay or refinance before the end of a fixed period
Why the headline rate isn't the total cost
Two loans with the same headline rate can have very different total costs once arrangement fees, valuation costs and any exit charges are included. Ask for the full cost picture before you decide, rather than focusing on the rate alone.
Request a personal illustration
Because pricing depends on so many individual factors, the only reliable way to understand what a commercial mortgage would cost you is to request a personal illustration based on your actual circumstances and the specific property.
Who provides the advice and how it is paid for
Commercial Services are referred to a third party. Neither The Mortgage Genie nor PRIMIS are responsible for the service received.
The Mortgage Genie does not provide commercial mortgage advice. Our team will discuss your requirements and, where appropriate, identify a suitable partner adviser. We will explain who they are and obtain your permission before sharing your details.
We do not charge for commercial mortgage advice, because we do not provide it. The specialist will disclose its own fees and how it is paid before you decide whether to go ahead.