Commercial Mortgages – Is Competition Back?

For the last few years the cost of commercial mortgage borrowing has steadied but has remained fairly static across the market. We have seen no real breakaway in competition or divergence in interest rates.

There are a few signs that is changing.

Since the outbreak of Covid we have seen a clear change in commercial mortgage criteria from lenders across the board. Concerns over property use and occupancy have risen with lenders taking a much closer look at tenancies and alternative use.

As we start to come out of Covid restrictions the picture starts to become clearer.

For retail and sui generis properties there remains a closer analysis of the tenant, the lease and the alternative use of the property. For owner-occupier commercial units the appetite among lenders is starting to grow.

The benefit of having control over rents and the security of owning your own unit is starting to appeal to lenders and we have seen the start of increased completion for owner-occupier commercial mortgage lending.

Recovery Loan Scheme (RLS)

The RLS is being used by some lenders to support commercial mortgages. Whilst the borrower remains liable for the mortgage the lender gets a Government backed guarantee, with the borrower getting a lower interest rate and better terms as a result.

For lenders not using the RLS scheme, we are starting to see movement on interest rates to compete.

These are a few of the recent terms we have issued on commercial mortgages using this scheme:

Owner-Occupier Deals

One of the responses we have seen to the RLS scheme is that other lenders have responded in kind. At the moment we have an offer of 3.5% interest up to 60% loan to value for commercial owner-occupier mortgages.

As as standard rate this is lower than we have seen for a few years. This deal is only around until mid August but with terms being issued within 48 hours it is a really nice deal whilst it is here.

The Magic 4.5%

OK, not quite magic, but a figure worth remembering. If you are paying 4.5% or more in interest for a commercial mortgage where the property is occupied by your own business then it is well worth considering your options.

On a £500,000 mortgage the difference between paying 3.5% and 4.5% is £416 per month. Using the RLS scheme that saving could be higher.

Summary

Whilst the summer weather isn’t great, the options on commercial mortgages are. They are not going to be around forever but whilst they are there are some great deals to be had.

For more info then get in touch.

*As with any lending. Please always check repayments are affordable. Check you know what you are committing to. Take independent legal advice. Understand your risk. All lending is based on individual criteria subject to assessment by the lender