A commercial loan is a loan that is secured against a property for the purposes of business. These loans can last three years but they can also take up to 25 years.
There are many reasons why someone would take out a commercial mortgage. These include:
- Buying a new business
- Funding the purchase of a new business
- Reinvesting released capital from an existing enterprise
- Refinancing for future progression of the business
- Buying investment properties
Residential mortgages are similar to commercial mortgages in that they can be offered at a fixed or a variable rate. Variable-rate mortgages are more common but you can still find opportunities to get fixed-rate loans. By going with a fixed rate, you will be able to structure your business’ finance with more assurance, without having to worry about rising interest rates.
Different types of commercial property
A lot of properties could be classed as a commercial property – a property of the business. These properties include:
- Offices – a commonplace of work
- Retail – retail stores, shopping centres, supermarkets, high street stores
- Hospitality and leisure – restaurants, pubs, hotels, gyms, sports facilities
- Industrial – factories, foundries, warehouses
- Healthcare – hospitals, chemists, medical centres
As you would imagine, a semi-commercial property has a level of business attached to it, alongside some residential usage. A business – like a hairdressers – with a flat above it would be a good example of this.
The cost of living has risen by 5.4% in the past 12 months, its quickest rise in 30 years, and this could have an adverse effect on property developers and sellers.
Heading for trouble
Mortgage lenders look set to lessen the amount of money that they are willing to borrow, according to This Is Money. Households are set to be losing an extra £2,440 a year – according to economists – partly due to the hefty increase in energy bills that is set to come into play, as well as all other price rises across society.
Such rises will affect everybody across the board. Those on the breadline will be hit the hardest but higher earners will also have to reassess their financial situation. As a result, mortgage lenders will want more money put down on the table before they unlock the door to big sums of money.
This is going to hit house buyers hard. Not only will they be facing an increase in their household bills, they will also have to raise more money for mortgage lenders. This will be difficult for anybody who is trying to save or budget because there will be less money available to do that now. Individuals will have to take on a secondary job or more hours in their current job, in order to get that mortgage.
On the other hand, the Bank of England could relax the mortgage affordability test that buyers have to pass in order to gain access to a mortgage, allowing people to access mortgages more with less red tape.
How could this affect the housing market? Well, it might be better to hold-off trying to profit properties in the short term. At the same time, the economic effects of the pandemic and Brexit are not going to go away for some time. People who make their money within the property market are going to have to be adaptable to cope with this new challenge.
Governmental measures were put into place by Rishi Sunak in the middle of the pandemic to keep the housing market going. The average house price actually increased compared to the years before it. However, what it looks like there will be a difficult time ahead for everybody across the board. Individuals and businesses are going to have to make some difficult decisions in order to