Commercial mortgage landscape in 2025

Navigating the commercial mortgage landscape in 2025: Five factors that will help you decide on the viability of a major purchase

Buying a property for your business is not just about timing: Let’s at the five factors that should influence your decision in the coming year.

In the ever-shifting world of business, knowing when to make a move is crucial. While recent economic headlines might have caused hesitation, the commercial mortgage market is showing signs of renewed vigor, offering potential opportunities for savvy SME owners.

The past year has seen a recalibration in the financial landscape. After a period of fluctuating interest rates and market uncertainty, a sense of stability is returning, boosting confidence among both borrowers and lenders. This shift presents a window of opportunity for SMEs considering property acquisition.

Key factors to consider

There are five main factors to consider before you begin the process of applying for a Commercial Mortgage. As with any major purchase, putting the time in to ensuring the fundamentals are correct will pay off further down the line – and could prevent you from making costly mistakes or unnecessary delays in what can already be a long process.

1. Interest rate trends

At the time of writing, The Bank of England base rate is 4.5% – down from 5.25% as of February 2025.

While the Bank of England base rate remains a factor, increased competition among high street and challenger banks is driving down margins.

Fixed-rate mortgages are currently attractive, with lenders offering competitive deals due to stabilizing wholesale funding costs. Securing a fixed rate now can provide long-term financial predictability.

Consider that while rates may drop, they may also rise again. Fixing a rate for a medium term period may be a good idea, if only because it allows for stability and predictability in your cashflow.

2. Lender appetite and competition

The battle for your business goes beyond the interest rates being offered. High street banks are demonstrating a renewed appetite for SME lending, aiming to increase their lending volumes as a response to the challenger banks which have proven to be more agile, offering faster processing, flexible loan structures, and higher loan-to-value ratios.

Engaging a finance broker like Swoop is crucial in navigating this competitive landscape. Brokers have access to exclusive deals and can present your business case to multiple lenders, ensuring you secure the most favorable terms.

Rather than simply accepting what is available, SME owners should place themselves in a situation where lenders are competing for their business.

3. Economic stability and long-term Investment

Whether a property purchase is right for your business depends on the nature of your business: what are your long term objectives? And how would property ownership feed into those objectives? 

Property ownership can serve as a hedge against inflation, as property values tend to appreciate over time. This may affect your exit planning. 

If your business has existing debts, a commercial mortgage can be a strategic tool for consolidating them, freeing up cash flow for growth and expansion.

Owning your property provides greater control over your business space, allowing for renovations, customisation, and potential income generation through subletting.

4. Risk assessment and preparation

Lenders prioritise low-risk deals. A strong trading history, well-managed cash flow, and a comprehensive business plan are essential for securing favorable terms.

Working with a broker to “de-risk” your deal and present a compelling business narrative significantly improves your chances of success.

There are signs that lenders are changing the metrics around risk; again, having a broker who understands the market will be able to give you insights into which lenders are more likely to be willing to offer a deal that is suitable for your needs.

5. The evolving digital lending landscape

An increased use of AI-based risk assessment from many lenders, as well as intelligent automation, has made property finance a lot smoother in recent years.

Many lenders have now adopted technologies such as improved digital applications that can make the experience more seamless. Be warned, however: the promises are of improvements made to a slow process, not of making property purchase a toboggan run. Buying a property is still a very human business with human decisions made at every point. There is plenty of scope for human experience and expertise to help you with decisions along the way. 

Is now the right time?

As with any major purchasing decision, timing is critical: the right time for you might be bad for another business. One factor could weigh more powerfully than the others in affecting your judgement. And there are never any guarantees about what the future will bring. 

The major signs are that despite potential economic headwinds, the commercial mortgage market is presenting favorable conditions for SMEs. With increased lender competition and attractive fixed-rate options, securing a commercial mortgage can be a strategic move for long-term growth and stability.

By working with a knowledgeable broker such as Swoop, SME owners can navigate the complexities of the market and secure the best possible deal.

By carefully considering these factors and seeking expert guidance, SME owners can make informed decisions about whether a commercial mortgage is the right move for their business. Discover how Swoop could help you with your commercial mortgage.