UK semi-commercial mortgage lending is on course to exceed £1bn for the first time in 2026, according to a new mortgage index from TAB, after lending volumes and transaction activity continued to accelerate in the second quarter.

The lender's inaugural Mixed-Use Mortgage Monitor estimated total lending reached £242m in Q2, up 20% from £201m a year earlier, while completed deals rose 13% to around 470 from 415. Based on current growth rates, TAB forecast annual lending will surpass the £1bn milestone this year.

The report found the market has expanded by more than 30% since TAB began tracking it in early 2025, with average loan sizes increasing 6% year-on-year from £484,000 to £515,000, helping overall lending values outpace transaction growth. The number of active lenders also rose to 28 from 25 over the past year, while dedicated semi-commercial mortgage products increased by almost 20% to 94.

Average loan-to-value ratios climbed up to 67% from 64%, and average fixed mortgage rates eased to around 6.70% after peaking at 6.85% in the first quarter of 2026.

TAB attributed the market's growth to mainstream banks continuing to retreat from smaller and more complex commercial lending significantly after 2008, allowing challenger banks, specialist lenders and some building societies to gain market share.

The company also said experienced residential landlords were increasingly turning to mixed-use properties to diversify income streams and improve portfolio resilience, while refinancing activity continued to support demand. While the market is starting to mature, it’s also becoming increasingly specialist, it concluded.

Duncan Kreeger, founder and CEO of TAB, said: "For a dynamic market that has been growing so rapidly, semi-commercial lending has been surprisingly under-analysed. There are more deals being done. There is more money being lent. Borrower appetite is strong.

"At the rate the market is growing, with the value of deals growing 14% over the last quarter, we expect – assuming current growth continues – that annual lending to exceed £1bn by the end of 2026.”

---