Product types

Investment commercial mortgage

Commercial mortgage where the property is let to a third-party tenant and the rent covers debt service. Sized off the rent and an ICR test.

Investment commercial mortgage is a UK commercial mortgage where the property is let to a third party (or is being acquired vacant for letting) and the rent is the cash flow that services the loan. The lender’s credit view is fundamentally about the rent, the tenant covenant, and the lease, rather than about the borrower’s own trading income.

How investment deals are sized

Two parallel tests, both must clear:

ICR: stressed annual rent versus stressed annual interest. Typical thresholds 140 to 175% depending on sector.
LTV: loan size against the lender’s valuation. Typical ceiling 65 to 70% on prime, lower on specialist.

Debt yield often sits as a third test on larger tickets, especially with the more institutional lenders.

Typical UK pricing as of May 2026

Investment commercial 5-year fixes sit in the 6.5 to 8.5% per annum range. The wider band reflects sector and covenant dispersion: prime industrial to a covenant tenant at the floor, secondary retail with weaker income at the ceiling.

A worked broker example

A West Yorkshire investor buying a prime industrial unit. Purchase price 1.3 million. Annual rent 95,000 to a covenant tenant on a 10-year lease. Investor wants 845,000 (65% LTV).

LTV test: 845,000 on 1.3 million = 65%. Clears.
ICR test (stressed at 8.5%): stressed annual interest 71,825. ICR is 132%. Fails the 140% prime industrial threshold.

The deal does not size at 845,000 on ICR. Backsolving, the loan that clears 140% ICR is 798,000. The investor either accepts 798,000 or finds a lender with a softer stress.

This is the daily pattern of UK investment commercial mortgages. LTV looks fine. ICR binds. Brokers who anchor expectations on LTV alone lose deals at heads of terms.

Tenant covenant grading

Lenders grade tenant covenants and adjust ICR thresholds accordingly. Plc-listed and government-backed tenants get the lightest treatment. SME tenants on short leases get the heaviest. Each lender publishes (or, more often, holds privately) its tenant-grade framework. Brokers should ask early.

Lease length and break clauses

Most UK commercial investment lenders want unexpired lease term of at least 5 years on a 5-year fixed-rate mortgage, ideally without break clauses inside that window. Lease shorter than the fix length narrows the lender pool sharply.