The semi-commercial mortgage sector is poised for significant growth, with lending expected to surpass £1 billion by the end of 2026. This surge is driven by an increase in transaction volumes and average loan sizes, indicating a robust demand for semi-commercial properties in the UK.
What is driving the growth in semi-commercial mortgage lending?
According to recent data, the semi-commercial mortgage market has seen a remarkable increase in lending, with £242 million completed in the second quarter of 2026 compared to £201 million in the same period last year. This represents a 20% growth, highlighting a strong demand for properties that blend residential and commercial uses. The increase in transaction volumes, estimated to have risen by 13% from 415 completions in Q2 2025 to 470 in Q2 2026, further underscores this trend.
How are average loan sizes changing?
Average loan sizes in the semi-commercial sector have also seen a notable increase, rising from £484,000 to £515,000 year on year. This 6% growth in loan sizes has contributed to the overall increase in lending value, suggesting that borrowers are seeking larger amounts to finance their investments in semi-commercial properties.
What does this mean for landlords and investors?
The growth in semi-commercial mortgage lending presents a significant opportunity for landlords and investors. With the number of active lenders increasing from 25 to 28 over the past year, and the variety of dedicated semi-commercial and mixed-use mortgage products rising by almost 20% to 94, borrowers now have more options than ever. Additionally, average loan-to-value ratios have increased from 64% to 67%, making it easier for investors to secure financing.
Challenger banks and specialist lenders are at the forefront of this growth, offering competitive rates that range from approximately 6.0% to 9.0% based on the asset type and transaction complexity. This competitive environment is likely to benefit borrowers seeking semi-commercial mortgages as lenders vie for business.
What are the implications of rising interest rates?
As the market evolves, the average headline fixed rates for semi-commercial mortgages have eased slightly to around 6.70%, down from 6.85% earlier in 2026. However, borrowers should remain vigilant as rates from challenger and specialist lenders can vary significantly. TAB’s own variable-rate product is currently priced at Bank Rate plus 3.5 percentage points, equating to a rate of 7.25%. Investors should keep an eye on these interest rates, as they can impact overall borrowing costs and investment returns.
Frequently asked questions
What types of properties qualify for semi-commercial mortgages?
Semi-commercial mortgages are typically secured against properties that have both residential and commercial uses, such as mixed-use developments where retail or office space is combined with residential units.
How can I find the best semi-commercial mortgage deals?
To find the best semi-commercial mortgage deals, consider consulting with a mortgage broker who specializes in commercial lending. They can provide insights into the latest products and rates available from various lenders.