The commercial property market in the UK is estimated to be worth around £600 billion, and with rates rising it is inevitable that some business are going to start feeling the effect.
However, the impact of commercial mortgage rate rises is not going to be uniform with certain sectors more susceptible than others.
With a great many commercial mortgages being priced on a LIBOR based margin there will be plenty of small business owners dreading the letter from their commercial lender advising them of a rate rise. These rises will, in time, also impact tenanted properties too as landlords seek to protect their rental incomes. Another effect of commercial mortgage rate rises will be the tightening of criteria by commercial lenders.
Specialist repossession lawyers report that the two types of businesses most likely to get in to trouble are pubs and high street retail outlets. Worth bearing in mind that as pubs and restaurants are over three times more likely to fail anyway so it should be no surprise that they are more likely to face repossession proceedings.
The other consideration with these types of business models is that are more susceptible to macro-economic pressures and other local issues.
Pubs, restaurants and high-street restaurants all operate with highly competitive and fickle markets, with the Internet driving prices down and employment costs rising they are particularly vulnerable to rate rises.
Careful budgeting and control of costs are obviously vital but unfortunately there is little else that a business can do to protect itself from commercial mortgage rate rises. The obvious advice is to be on the look out for cheaper mortgage rates from other lenders, but a great many commercial mortgages carry hefty early repayment so care is needed.