Small and medium-sized enterprises (SMEs) should look at finance options other than commercial mortgages when looking to fund a new commercial property let or purchase.
This is the opinion of Harry Katz of Norwest Consultants, who says that commercial mortgages offer very poor value for money, with lenders typically trying to rip off borrowers.
"Because it’s commercial, they think they can get away with charging you practically anything," he said.
"The charges for arranging [a mortgage], they’re charging one per cent and sometimes more – that’s a rip-off! Apart from that, the interest rate they charge you is also higher, and the length of time they’ll lend it to you is shorter."
Other options for funding a commercial property purchase are buying your property through your pension or remortgaging your home, he says.
A pension purchase is a particularly good idea because then "you pay yourself rent and the rent goes into your pension fund – and you get full tax relief".