Semi-commercial mortgage lending reached £250m in the third quarter of 2026, according to research from commercial mortgage and bridging lender TAB.
The latest edition of TAB’s Mixed-Use Mortgage Monitor shows a 3% increase on the previous quarter.
The Monitor estimates that semi-commercial mortgage lending has grown 36% since Q1 2025, when lenders advanced £184m a quarter. However, the pace has eased, with year-on-year growth in lending values slowing from 20% in Q2 to 14% in Q3.
Annualised, the market is now lending at a rate of £1bn a year, the first time that has happened since the Monitor’s data series began in Q1 2025. Over the last four quarters combined, lenders advanced about £936m.
Lenders that entered the market in the spring drove the Q3 increase. New ranges launched in May and June typically take eight to 12 weeks to move from application to completion, so much of that business landed in July, August and September. Refinancing from bridging onto longer-term debt also supported lending as bridging loan books ran off, and steady economic growth over the summer helped too.
The number of active semi-commercial term lenders reached 30 in Q3, up from 25 at the start of 2025. Two lenders entered during the quarter and none left.
“We’ve seen another two lenders, both rooted in bridging, moving into longer-term semi-commercial lending – these lenders want to keep hold of borrowers when they refinance away from bridging loans,” said Duncan Kreeger, chief executive of TAB (pictured).
“In fact, the last quarter extended a run of new entrants. One lender arrived in late 2025, and another three launched semi-commercial ranges in Q2 2026. Let’s not forget the market has also absorbed a significant exit: MFS entered administration in February 2026, contributing to a dip in lending in Q1.”
The number of live products rose 5%, from 94 in Q2 to 99 in Q3. New products from the two entrants, together with new loan-size and LTV bands at an established lender, added to the total. However, lenders withdrew a small number of fixed-rate products in September as swap rates rose, far fewer than the mass withdrawals across the mortgage market in March.
“Even at 99 products, semi-commercial remains a specialist corner of the market,” he noted. “Borrowers typically have a fraction of the choice available to residential or standard buy-to-let borrowers, and many cases still need a broker who knows which lenders will consider a particular mix of commercial and residential space.”
Average loan sizes shrank 1% to £510,000, as newer lenders wrote more small-ticket loans and average LTVs dipped slightly. Growing appetite for larger loans elsewhere in the market partly offset those effects.
The average headline fixed rate on semi-commercial term mortgages fell to 6.65% in Q3 from 6.70% in Q2, but the modest fall hides two opposing trends. Several established specialist lenders cut rates in July and August, in some cases by up to 75 basis points.
New entrants, however, priced towards the top of the market, with fixed rates of up to 7.99%. Two-year swap rates then climbed above 4.70% in September, and high street lenders repriced twice that month. Most specialist lenders had not followed by the end of the quarter.
“The Bank Rate stayed at 3.75 per cent throughout Q3,” Kreeger said. “While that’s 25 basis points lower than it was a year ago, the average semi-commercial rate is 10 basis points higher. The gap between the two has widened from 2.55 percentage points in Q3 2025 to 2.90 percentage points now.
“The Monitor has seen this before. In Q1 2026, rising swap rates pushed specialist pricing up even though Bank Rate was unchanged. Semi-commercial pricing follows wholesale funding costs more closely than the Bank of England’s headline rate, and borrowers waiting for base rate cuts to reach their mortgage may wait longer than they expect.”
The average loan-to-value fell to 66.5% from 67% in Q2. Much of the sharpest new pricing was available only at or below 65% LTV. As swap rates rose, lenders also applied tougher interest cover tests, which reduce how much some borrowers can borrow.
“Valuers are taking a cautious view of commercial space in some locations,” he explained. “Expectations for secondary retail rents are down, which matter for typical mixed-use properties with a shop on the ground floor. Higher LTVs are still available, with some lenders offering up to 75 per cent, but the average deal is being written with a little more equity.”
Other factors held back semi-commercial mortgage lending over the quarter. August is usually quiet, and the Monitor does not adjust for seasonality, while brokers reported transactions taking longer to complete. The two lenders that entered the market in Q3 did not launch their semi-commercial products until mid-September, too late to add much to the quarter’s completions.
TAB’s analysis suggests semi-commercial mortgage lending will continue to grow in Q4, but more slowly. The company expects September’s sharp rise in swap rates to feed through to pricing in the final quarter, curtailing activity somewhat.
“Specialist lenders are likely to reprice upwards to reflect September’s swap-rate rise, reversing some of the summer’s cuts,” Kreeger added.
“On the plus side, September’s two entrants should begin to add completions in Q4 and Q1 2027, supporting competition. And since TAB secured a new £200m funding facility from a challenger bank in September, we’ll be bringing more momentum to the market, lending more aggressively and offering more commercial mortgages at bridging speed.
"While we also expect at least one more lender to come to market, which could lift the count again in Q4, if brokers are thinking semi-commercial, they should think TAB.
“The next edition of the Monitor, covering Q4 2026, will show whether the market can reach £1bn for the calendar year. Semi-commercial lending is now running at a rate of £1bn a year, which would have seemed ambitious when we started tracking this market. Thirty lenders are active, borrowers have more products to choose from, and the market has absorbed the loss of a significant lender without stalling.
“But growth has slowed from 20 per cent to 14 per cent over the past quarter and we expect Q4 to be a test of whether the newer entrants can keep lending at competitive rates when their own funding costs go up.
Kreeger concluded, “For borrowers, the lesson from this year is that Bank Rate is not the number to watch. The average semi-commercial rate is higher than it was a year ago, even though the base rate is lower. Anyone with a fixed rate ending in the next six months should be talking to a broker now rather than waiting for a miracle from the Bank of England.”
