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Understanding Commercial Mortgage Rates
How commercial mortgage pricing works, what drives rate differences, and where current rates stand across lender tiers.
Rate Overview
Types of Commercial Mortgage Rates
Commercial borrowers can choose between fixed, variable, or convertible rate structures depending on their risk tolerance and cash flow requirements.
Fixed Rate
Your interest rate remains constant for the entire mortgage term, providing complete payment predictability. Fixed rates are tied to Government of Canada bond yields and are ideal for borrowers who prioritize stable cash flow projections. Terms typically range from one to ten years, with five-year terms being the most common.
Variable / Floating Rate
Your rate fluctuates with the lender's prime rate, which tracks the Bank of Canada overnight rate. Variable rates are typically quoted as prime plus or minus a spread. They usually start lower than fixed rates and can result in significant savings when rates are stable or declining, but carry the risk of payment increases if rates rise.
Convertible Rate
Some lenders offer the ability to convert from a variable rate to a fixed rate during your term. This hybrid option lets you benefit from lower variable rates initially while preserving the flexibility to lock in a fixed rate if market conditions shift. Conversion terms and fees vary by lender.
What Affects Your Rate
Property Type & Quality
Multi-family residential properties command the lowest rates. Office, retail, and industrial follow. Hotels, land, and specialty assets carry higher rates due to greater perceived risk.
Loan-to-Value Ratio
Lower LTV means more borrower equity and less lender risk, which translates to better rates. A deal at 50% LTV will price significantly better than one at 80% LTV.
Borrower Profile
Credit history, net worth, real estate experience, and existing portfolio size all influence rate pricing. Stronger borrower profiles access better terms and higher leverage.
Term & Amortization
Shorter mortgage terms generally offer lower rates. Longer amortization periods reduce monthly payments but may result in slightly higher rates depending on the lender and program.
Current Rate Ranges by Lender Tier
Commercial mortgage rates in Canada vary significantly depending on the type of lender. Here is where rates generally fall across the three major lending categories.
Institutional Lenders
4.50% – 6.50%
Banks, credit unions, life insurance companies, CMHC-insured programs
Best for: Strong borrowers with stabilized, income-producing properties and full documentation.
Alternative Lenders
6.50% – 9.50%
Trust companies, mortgage investment corporations, non-bank lenders
Best for: Borrowers with credit challenges, transitional properties, or non-standard income documentation.
Private Lenders
8.50% – 14.00%+
Private capital, syndicated mortgage funds, individual investors
Best for: Urgent timelines, equity-based approvals, bank declines, land and construction deals.
Rates are approximate and subject to change based on market conditions, property specifics, and borrower qualifications.
Frequently Asked Questions
The right choice depends on your risk tolerance and market outlook. Fixed rates provide payment certainty and are ideal for borrowers who want predictable cash flow throughout the term. Variable rates start lower and benefit borrowers when interest rates are stable or declining. Many borrowers choose a fixed rate for stability on their primary debt and a variable rate on supplemental financing.
Commercial rates are typically higher than residential rates because commercial properties carry greater risk and complexity. Pricing is based on the individual property's income, the borrower's financial strength, and deal-specific factors rather than standardized rate tables. Each commercial mortgage is individually underwritten, meaning rates are negotiated rather than posted.
Most institutional lenders offer rate holds or rate locks for 30 to 90 days once a commitment letter is issued. Some lenders charge a fee for extended rate holds. Alternative and private lenders may not offer formal rate locks, with the rate being finalized at the time of funding. Your broker can negotiate rate hold terms as part of the commitment.
A conversion option allows you to switch from a variable rate to a fixed rate during your mortgage term without refinancing. This provides flexibility to start with a lower variable rate while retaining the ability to lock in a fixed rate if market conditions change. Not all lenders offer conversion options, and there may be conditions or fees attached.
Commercial mortgage rates are influenced by Government of Canada bond yields, the Bank of Canada overnight rate, and lender-specific credit spreads. Bond yields fluctuate daily, which means the rates available to you can change between the time you apply and the time you close. Working with a broker who monitors the market helps you time your rate lock strategically.
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