The semi-commercial mortgage sector is on track for significant growth, with lending expected to surpass £1 billion by the end of 2026. This surge is driven by increasing transaction volumes and rising average loan sizes, indicating a robust demand for mixed-use properties that combine residential and commercial elements.
What is Driving Growth in Semi-Commercial Mortgages?
In the second quarter of 2026, semi-commercial lending reached £242 million, a 20% increase from £201 million in the same period last year. This growth is reflected in a 13% rise in transaction volumes, from approximately 415 completions in Q2 2025 to 470 in Q2 2026. The increase in lending value is attributed to a 6% rise in average loan sizes, which grew from £484,000 to £515,000.
Who are the Key Players in the Market?
The number of active lenders in the semi-commercial mortgage sector has increased from 25 to 28 over the past year. This expansion includes a notable rise in dedicated semi-commercial and mixed-use mortgage products, which have grown by nearly 20% to a total of 94 offerings. The shift in lending dynamics has been influenced by mainstream banks scaling back on complex commercial lending, creating opportunities for challenger banks and specialist lenders to fill the gap.
What This Means for Landlords and Investors
For landlords and property investors, the growth in semi-commercial mortgage lending signifies a more competitive market with increased options for financing mixed-use properties. The average loan-to-value ratios have also risen from 64% to 67%, making it easier for borrowers to secure larger loans against their properties. Additionally, average fixed rates have eased slightly to around 6.70%, down from 6.85% earlier in the year, providing potential cost savings for new borrowers.
What Should Borrowers Watch Next?
As the semi-commercial mortgage market continues to expand, borrowers should keep an eye on the evolving market of lending products and rates. With rates from challenger and specialist lenders ranging between 6.0% and 9.0%, depending on the asset and transaction complexity, it is important for borrowers to assess their options carefully. The anticipated continued growth in the market could lead to further product innovations and competitive pricing, making it an opportune time for those looking to invest in mixed-use properties.
Frequently asked questions
What are semi-commercial mortgages?
Semi-commercial mortgages are loans secured against properties that have both residential and commercial uses, allowing investors to finance mixed-use developments.
How can I benefit from the growth in semi-commercial lending?
Investors can benefit from increased lending options and potentially lower rates, making it easier to finance mixed-use properties and expand their portfolios.