A large volume of UK commercial property debt written in the cheap-money years is reaching maturity across 2026 and 2027. Loans agreed at rates that no longer exist are falling due into a market where the Bank of England base rate sits at 3.75% following the Monetary Policy Committee’s hold on 17 September 2026, and where commercial mortgage pricing generally runs somewhere between 5.5% and 9.5% depending on asset, tenant covenant and gearing.
For owners of shops, industrial units, offices, care homes and mixed-use blocks, that creates a straightforward question with a complicated answer: refinance, restructure, or sell. This article sets out how lenders are approaching commercial refinance in the current market, what the affordability arithmetic looks like, and when to start.
Why 2026 refinances are harder than the original loan
Most commercial term loans are five-year facilities on a longer amortisation profile. A facility agreed in 2021 was priced against a base rate close to zero. The same asset, refinanced today, faces a materially higher cost of debt and a lender applying a stress test on top of that.
Two things follow. First, the interest cover the property could comfortably support in 2021 may not clear today’s threshold. Second, valuation movement in certain sectors, particularly secondary offices and some high street retail, means the loan-to-value ratio may have drifted upwards even where the borrower has been paying down capital. We looked at the valuation side of this in our article on house prices, loan-to-value and down-valuations in 2026, and the same dynamic applies with more force to commercial stock.
DSCR: the number that decides the case
Commercial lenders underwrite to debt service coverage ratio rather than the interest coverage ratio familiar from buy-to-let. DSCR compares net operating income to total annual debt service, capital and interest, not interest alone. It is therefore a more demanding test.
- High street banks commonly look for around 1.30x at the stressed rate.
- Most lenders set a floor of approximately 1.25x.
- Specialist lenders may consider 1.20x on prime assets with strong tenant covenants.
Net operating income means rent after irrecoverable costs, not headline rent. Voids, management fees, service charge shortfalls on vacant units and non-recoverable repairs all come out before the ratio is calculated. Borrowers frequently present gross rent roll and are surprised when the lender’s figure is 10% to 15% lower.
Where the stressed DSCR falls short, the usual levers are a lower loan quantum, a longer amortisation profile, a part-interest-only structure, or additional security. Each has a cost, and the right combination depends on what the borrower intends to do with the asset over the next five years.
What lenders are scrutinising in 2026
Tenant covenant and lease length. Unexpired term to break is doing more work in credit papers than it did five years ago. A ten-year lease with five years to a tenant break is underwritten closer to five years than ten.
Sector. Industrial and logistics, food-anchored retail and purpose-built healthcare are attracting competitive terms. Secondary office and large-format retail face tighter LTV caps and, in some cases, no appetite at all from mainstream lenders.
EPC and capital expenditure. Minimum Energy Efficiency Standards remain a live underwriting issue for commercial property. Lenders increasingly want to see a costed plan for bringing sub-standard units up to a lettable rating, and will size the facility with that spend in mind.
Ownership structure. Where the asset sits in a special purpose vehicle, or has moved between connected companies, lenders will want the chain of title and the commercial rationale documented. We covered the mechanics of that in refinancing a property transfer between your own companies.
Start earlier than feels necessary
Nine to eighteen months before the earliest material maturity is the sensible window. That allows time for a valuation, for the borrower to address any obvious lettings or capital expenditure issues before the valuer attends, and for terms to be tested with more than one lender without a deadline forcing the decision.
Leaving it to the final quarter narrows the options considerably. At that point the existing lender knows the borrower has nowhere to go, and a short-term bridging facility to buy time becomes the realistic fallback rather than a chosen strategy.
When bridging genuinely helps
There are cases where short-term finance is the correct answer rather than a rescue: an asset being repositioned, a vacant unit being refurbished and let before a term lender will look at it, or a portfolio being broken up for sale. In those situations a bridge with a credible, evidenced exit is a legitimate part of the plan. Pricing on commercial bridging currently sits broadly between 0.75% and 1.25% per month, with loan-to-values around 65% to 70%. The exit is what determines whether the case is fundable, a point we set out in detail in our guide to how bridging loans work in the UK.
Covenants worth reading before you sign
Refinance documentation in the current market tends to carry tighter covenant packages than borrowers saw in 2021. Points to examine:
- DSCR and LTV covenants with cure rights and the consequences of breach.
- Cross-default provisions, which can allow a problem at one asset to affect facilities secured on others.
- Valuation triggers permitting the lender to call for a revaluation at the borrower’s cost.
- Early repayment charges, which matter if a sale is a realistic possibility inside the term.
Getting the case in front of the right lender
Commercial lending is not a single market. Clearing banks, challenger banks, debt funds and specialist commercial lenders each have distinct appetites by sector, geography and loan size, and those appetites change through the year. Presenting a case to a lender with no current appetite for the asset class wastes weeks and leaves a credit search on file.
Giles Finance places commercial refinance cases across the whole of the market. If you have a facility maturing in the next eighteen months, our commercial mortgage team can review the asset, model the stressed DSCR and identify which lenders are realistically in play. You can also browse related material in our commercial and corporate banking hub, or read our foundation guide, what is a commercial mortgage in England and Wales. We work with clients across the country, and you can see where we operate on our areas we cover page.
To discuss a maturing facility, call 0208 088 2211 or use our contact page.
Tax treatment depends on individual circumstances and may change. Nothing in this article constitutes tax advice; you should take advice from a qualified accountant or tax adviser before acting.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Most commercial mortgages, bridging loans and business lending are not regulated by the Financial Conduct Authority.
Giles Finance is a trading style of Giles Finance & Consultancy Services, authorised and regulated by the Financial Conduct Authority (FRN 726857).