The timing of our new commercial BTL mortgages pilot has worked out well

We’re always looking for new ways to support property investors. It’s why we’re so excited to be trialling new commercial and semi-commercial BTL mortgage products. 

We’re already proud of how our specialist residential mortgages have performed since being introduced in early 2022. 

Despite all the challenges we came up against, we delivered a residential BTL product that truly brings bridging-like speed and flexibility to the mortgage market. We thought it only fair to do the same for commercial landlords. 

It’s been in the works for a while now, but we’re happy with what we’ve delivered. As a reminder: The semi-commercial and commercial products will be available between £150k and £1.5 million per unit, and up to £10 million per Ultimate Beneficial Owner (UBO). 

As with all our products, powerful leverage and flexibility to match borrower requirements are key features. So, borrowers will be able to roll-up interest for a maximum of six months and defer up to 1.5% of interest.

Both mortgage products will offer loans up to 70% LTV, and an Interest Coverage Ratio (ICR) of 130% for all customer groups. And on customers, we’ll be able to lend to a range of borrowers and business types. 

This includes, but isn’t limited to: Owner occupiers in their own premises, retail, offices, serviced apartments, those with adverse credit histories, PBSA, complex borrower structures, and first-time commercial landlords. 

Mike Cook, our chief mortgage officer, put it best: “There are a lot of exciting features to the new commercial term proposition. The fact that brokers and their clients can utilise deferred and rolled-up interest to maximise their loan size will likely prove popular, while the speed at which mortgages can be delivered will be another differentiator. 

“We know that there has been undersupply, service challenges, and restrictions in many areas of commercial finance, and we constantly get requests for such a product. 

“Many property investors are considering opportunities. These new products are designed to enable property investors to seize those opportunities with confidence.”

There’s potential in the commercial property market

We like to think we’ve timed this launch well. The entire property landscape has faced unprecedented challenges in recent months. But, the tide may be turning in the commercial world. 

Signs of growth and recovery are emerging. Demand for industrial and/or warehouse space is on the rise at the moment. Currently, of all such spaces listed in England, 31% have already been sold subject to contract (SSTC). 

Undoubtedly, companies looking to facilitate their ability to deliver online purchases efficiently plays a part here. The impact of the pandemic continues to sway property investment decisions, and economic shifts. 

Arguably, nowhere are these shifts more noticeable than in London. The capital’s expensive residential rental market is forcing many investors to rethink their strategies. 

A lower turnover of tenants, coupled with the longer leases typically available for offices and shops, has drawn interest from landlords. 

Around a third of London landlords who intend to add to their portfolios are considering making the switch from residential to commercial. Reportedly, larger shops are proving tempting, with 39% of those looking at commercial property considering making a purchase. This is ahead of smaller shops (38%), office space (37%), and industrial space (29%). 

The yields available could also prove tempting for investors. According to Savills, average prime commercial yields reached 5.98% in October. This was the highest level seen since November 2009. 

Certain sectors are performing particularly well. Prime equivalent yields for shopping centres hit 8.35% in October. Similar results were found for leisure parks (7.5%) and high-street retail properties (6.75%). 

There’s a lot going for our new commercial BTL products. Hopefully, we’ll be able to bring them to the wider market soon.