Owner-managed businesses are driving commercial mortgage activity in 2026, with purchases accounting for the bulk of new enquiries from challenger banks
Commercial mortgage demand in the UK has picked up meaningfully this year, with purchases – not refinancing – accounting for the dominant share of new business.
Keith Humphreys (pictured top), managing director of Pinpoint Finance, told Mortgage Introducer the shift became apparent once the December 2025 base rate cut had properly fed through to borrower behaviour.
"Demand picked up noticeably after Q1 of 2026, once the December rate cut had properly fed through," Humphreys said. "I find it takes a while for a base rate move to reach the point where a business owner reacts and starts thinking about doing something."
The shape of that demand challenges some common assumptions about the commercial mortgage market. More than 70% of Pinpoint's commercial enquiries are purchases rather than refinancing, and around 80% of those involve owner-managed businesses buying their own trading premises. The motivation is consistent – a long-term investment alongside the trading business, and the permanent removal of rental increases.
On loan-to-value (LTV), lenders are generally operating between 60% and 75%, with 65% identified as the point at which genuinely competitive rates become available. Borrowers pushing to 75% LTV will find the pricing reflects that ambition.
Where the market is hardest to serve
Not all segments of the commercial mortgage market are equal, and some are proving considerably harder to place than others. Humphreys points to semi-commercial as an area of quiet evolution, with a small number of lenders beginning to treat it in a more formulaic way – closer to a buy-to-let application – which has expanded placement options for brokers. The practical caveats, however, are significant. The commercial-to-residential split on the property, its location, and the strength of the commercial tenant all remain central to how lenders assess the case.
Commercial investment, by contrast, remains firmly in the harder category. High-street lenders are cautious, and their rates and LTV limits reflect that. Underwriting of leases and covenant tenants is strict, with rental yield, tenant strength, lease term, and break clauses all subject to close scrutiny. The Financial Conduct Authority (FCA) does not directly regulate commercial mortgage lending in the same way it does residential, but lenders operating across both sectors apply similarly rigorous standards to protect both parties.
Low-value commercial lending is a particular frustration. Most lenders will not engage with debt levels below £150,000, leaving brokers reliant on high-street banks for smaller deals that are, in Humphreys's words, "perfectly good deals, perfectly good borrowers, just too small to interest most of the lenders."
Hospitality and leisure remain persistently difficult to place, compounded by ongoing weakness in both sectors. Most of Pinpoint's commercial business currently flows to challenger banks, where competition among lenders has increased noticeably over the past 12 months, but high-street lenders remain the right route for strong, owner-managed trading businesses where the underlying financials are robust.
What catches borrowers off guard
The gap between an advertised rate and the total cost of completing a commercial mortgage deal is a recurring theme in Humphreys's client conversations. Challenger banks tend to publish rate cards, which allows for direct comparison, while high-street lenders and some others price case by case – a process that can produce surprisingly competitive results or unexpectedly high ones.
Fixed rates are elevated at present, driven by the swap market and the cost of funds rather than lender margin. Most commercial lenders are governed by their funding lines, with fixed rates currently sitting in the high sevens for many borrowers. Brokers covering the commercial mortgage sector will recognise the dynamic well.
The real shock, however, is rarely the rate. "What actually catches people off guard is the fees," Humphreys said. "You're looking at 1.5% to 2% of the loan amount, and a lot of challenger banks insist on using their own solicitors, so that's a further cost that hasn't been factored into anybody's budget. It's rarely the rate that causes the sharp intake of breath, it's the total cost of getting the money."
Personal guarantees add a further layer of cost and complexity that clients frequently underestimate. Where a corporate entity is borrowing, most challenger banks require independent legal advice on the personal guarantee – an additional expense, an additional appointment, and a source of delay if the client has not been forewarned. Humphreys, who has spent his career working with owner-managed businesses across the commercial finance market, is emphatic on this point.
"I'd rather have that conversation at the start than at the offer stage."
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