We recently came across possible the lowest residential mortgage rate we’ve ever seen. A leading high-street bank had a mortgage available at 60% or lower LTV at just .98%! Even when you consider the impact that recent politics and the financial crises of the last few years have had on interest rates, that’s still an astoundingly low rate available. But such a low residential rate begets a question – are we seeing the same fall in the commercial sector?
Interest rates are arguably the most important part of a loan for the average finance-seeker, especially when it comes to commercial mortgages. After all, the lower the interest rates, the less you pay on the loan! This means that for many punters, the primary interest (no pun intended) they have in getting a loan is to get as low an interest rate as possible. Now, very low interest rates are definitely possible in the finance world – some of the lenders we work at ASC can go down as low as 0.5% over base rate – but they’re often only available by giving the lender a really great proposition. We’re talking lower than 50% LTV, with strong financials and rock-solid security. But what about your average business that’s looking for finance?
Well, the basic answer is that you shouldn’t be expecting your average commercial to have rates that low ever. Commercial finance is a bespoke process – this has many advantages, but it does come with more admin and thought going into the process. You can’t just “pre-package” a commercial loan in the same way you can a residential mortgage. As a result, by nature commercial loans normally have higher interest rates than their residential counterparts. With that said; have their interest rates changed? Well, depending on what you’re looking for, the answer is both yes and no. If you’re looking at an investment property (i.e. you want to buy a property to rent out), then the answer is a bit more variable – you can certainly get good interest rates, but we haven’t seen the drop that’s been observed in the residential sector. In the owner-occupied sector, though, where you’re raising finance for a business where you own the land it stands on, we are indeed seeing a fall in rates. Commercial loans change interest rates depending on how much you’re borrowing – the more you borrow, the lower the interest. But if you were looking at borrowing £500k at maximum LTV, you’d be looking at an interest rate of around 2.5-3%, which is notably lower than it has been previously.
So if you’re looking at financing your business, now is the time to go for it, and take advantage of getting more for your money!
