The semi-commercial mortgage market in the UK is on track to surpass £1 billion in lending by the end of 2026. This growth is driven by a significant increase in lending volumes and the number of active lenders, which is important for landlords and investors looking to finance mixed-use properties.
What is Driving Growth in Semi-Commercial Mortgages?
In the second quarter of 2026, semi-commercial mortgage lending reached £242 million, marking a 20% increase compared to £201 million in the same quarter of the previous year. This growth is reflected in the estimated transaction volumes, which rose by 13%, from approximately 415 completions in Q2 2025 to 470 in the latest quarter. The average loan size also saw a rise of about 6%, increasing from £484,000 to £515,000. This surge indicates a robust demand for financing in the semi-commercial sector, where residential and commercial uses coexist within a single property.
Who are the Key Players in the Semi-Commercial Mortgage Market?
The increase in lending activity is supported by a growing number of active lenders, which rose from 25 to 28 over the past year. This expansion includes a notable rise in dedicated semi-commercial and mixed-use mortgage products, which increased by nearly 20% to a total of 94 offerings. The market has seen a shift as mainstream high-street banks have reduced their complex commercial lending since 2008, paving the way for challenger banks and specialist lenders to fill the gap.
What This Means for Landlords and Investors
For landlords and investors, the expanding semi-commercial mortgage market presents new opportunities for financing mixed-use properties. With average loan-to-value ratios increasing from 64% to 67%, borrowers may find it easier to secure funding for their investments. Additionally, the easing of average headline fixed rates to around 6.70% from 6.85% in Q1 2026 suggests a more favourable borrowing environment. Challenger and specialist lenders are offering rates ranging from 6.0% to 9.0%, depending on the asset and transaction complexity, providing a variety of options for borrowers.
What Should Borrowers Watch Next?
As the semi-commercial mortgage market continues to grow, borrowers should keep an eye on the evolving market of lending products and rates. The forecasted annual lending to exceed £1 billion by the end of 2026 indicates a strong market trajectory, which may lead to further product innovations and competitive rates. Investors and landlords should also monitor the performance of challenger banks and specialist lenders, as they are likely to play a pivotal role in shaping the future of semi-commercial financing.
Frequently Asked Questions
What are semi-commercial mortgages?
Semi-commercial mortgages are loans secured against properties that have both residential and commercial uses, such as a shop with flats above. These mortgages cater to landlords and investors looking to finance mixed-use properties.
How can I benefit from the growth in semi-commercial lending?
The growth in semi-commercial lending means more financing options and potentially better rates for landlords and investors. With an increasing number of lenders and products available, borrowers may find it easier to secure funding for their mixed-use properties.