New and improved rates from a specialist investment mortgage lender demonstrate the growing strength of the semi-commercial and commercial property investment markets. After a difficult few years for the sector, are lenders gaining confidence again?
COVID-19 lockdowns had a devastating impact on high street businesses, meaning many lenders drastically restricted commercial and semi-commercial mortgage options and criteria. While some have relaxed their offerings over the last year, a new range from one lender demonstrates that, at long last, confidence is returning in earnest.
What is Semi-Commercial Investment Property?
Semi-commercial investment refers to a freehold property where a commercial unit (e.g. a shop) has a flat/flats above with separate access. This gives the landlord rental income from both commercial and residential tenants.
New Semi-Commercial Mortgage Criteria
The first major criteria point to write home about with these new products is that the lender has increased their minimum loan to value (LTV) from 70% to 75% (this also applies to the commercial range). A seemingly small but significant change, it clearly demonstrates a restored confidence in the sector.
The reduction of minimum property value to £150,000 and a minimum loan amount of £50,000 (previously £150,000) (England and Wales only) is also a positive step, opening-up semi-commercial investment to more investors looking to make smaller investments.
Further changes include removing the 1% Early Repayment Charges (ERC) overhang (a 1% charge payable upon exiting the mortgage even after the initial fixed term has ended) which will appeal to investors looking to keep mortgage fees at a minimum. The lender also added a number of commercial property types to the criteria, although businesses within the leisure and hospitality sectors may still struggle to agree terms.
New Semi-Commercial Mortgage Rates
Unusually, the interest rates for two, three and five year fixes are the same, and start from 4.99% at 75% LTV* for semi-commercial properties. If you are looking at fully commercial investments, rates start from 5.89% at 75% LTV for two, three and five years fixed*.
Opportunities for Semi-Commercial and Commercial Landlords
If you’ve been holding off on your next semi-commercial or commercial investment due to the restrictive market, this latest release clearly shows a positive change in lender attitude towards the sector. Now is an excellent time to start looking at your options and get your investment plans underway for 2022.
Opportunities for BTL Landlords
For those of you with two or more years buy to let experience, semi-commercial property can be an excellent way to diversify your portfolio and increase your income. Average yields for semi-commercial property were 6.43%, compared to vanilla buy to let at 5.88%, yet interest rates are lower than for fully commercial investments.
If you’re an existing landlord and interested in venturing into semi-commercial property investment, or an existing commercial landlord looking for their next investment, do get in touch and we can talk through your options. Call me, Robin Tait, on 01625 416391 or email me, firstname.lastname@example.org.