If you’re starting a business or are looking to expand your current operation, you’ll be in the market for a commercial property. In a competitive marketplace, it’s wise to understand the current commercial property loan rates in Melbourne.
This article guides you through this important topic so you understand today’s landscape and can make informed financing decisions.
The current economic climate and its impact on loan rates
The Reserve Bank of Australia (RBA) reduced the official cash rate to 4.10% in April 2025, the first rate cut in over four years. The decision reflects the central bank’s response to a gradual cooling of inflation pressure and a stabilising national economy. In the wake of this change, Australia’s major banks – including the Big Four – followed RBA’s move by lowering their commercial lending rates.
For businesses in Melbourne, this presents a great opportunity to access more affordable financing for property acquisitions or expansions. Understanding how these macroeconomic adjustments influence borrowing costs is essential for strategic investment choices.
Overview of commercial property loan rates in Melbourne
As of April 2025, commercial property loan rates in Melbourne reflect those of the broader economic environment and lender criteria. While conditions and interest rates do change regularly, let’s look at the average interest rates from traditional lenders compared to non-bank lenders in 2025.
Traditional lenders:
Banks are currently offering variable interest rates ranging from 5.89% to 10.74%. Factors such as loan-to-value ratio (LVR), loan amount, security type and borrower profile influence these rates. If you’re seeking more predictable repayments, fixed-rate options are available and typically span one to five years, with current rates ranging from 5.59% to 9.93%.
Non-bank lenders:
Non-bank lending institutions and private financiers offer greater flexibility, often catering to borrowers with unique circumstances or limited documentation. These loan providers have rates starting at 7.04%, although terms and approval criteria may differ significantly from traditional banks.
Factors influencing commercial loan rates
Several key factors determine the interest rate a lender will offer you on a commercial property loan in Melbourne:
Loan amount and LVR:
Lenders often offer more competitive rates for larger loan amounts, particularly when paired with a lower LVR. If you can contribute a higher deposit (resulting in a lower LVR), lenders will consider you less risky, which can lead to better terms.
Property type and location:
Commercial properties in high-demand areas or central business districts often have lower risk profiles, especially when they have established tenants or reliable income streams. Certain asset classes such as industrial units or office space are viewed more favourably than specialised-use properties.
Borrower profile:
The financial health of your business plays a major role in determining loan terms. A solid credit score, good trading history, clear financial statements and steady cash flow all help demonstrate reliability to lenders. New or high-risk ventures may face higher rates due to perceived uncertainty.
Fixed vs. variable rates: pros and cons
When you’re choosing a commercial property loan, deciding between a fixed or variable interest rate can significantly impact your long-term repayment options. Each option comes with its own set of benefits and cons:
Fixed Rates:
Commercial loans with a fixed rate lock in your interest rate for the entire term. This is typically between one to five years and provides consistent and predictable repayments.
Pros:
- Budgeting is easier due to stable monthly repayments.
- Protection from interest rate hikes during the fixed period.
Cons:
- Fixed rates are often slightly higher than variable rates.
- If the market rate drops, you won’t benefit from the reduction.
- Additional costs may apply if you refinance or repay early.
Variable Rates:
Loans with variable rates fluctuate based on market conditions and the lender’s discretion.
Pros:
- Generally lower initial rates compared to fixed options.
- Potential to pay less interest if market rates decline.
- Often more flexible with extra repayments or refinancing.
Cons:
- Exposure to rising interest rates could increase your monthly repayments.
- Less certainty for long-term financial planning.
Looking to finance a commercial property in Melbourne?
At Lend & Co, we specialise in securing competitive commercial property loans that are tailored to your unique requirements. Contact us today to find out where interest rates are sitting right now, explore your financing options and take the next step in your property investment journey.
