Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

Commercial Funding Demand Drops Amid Geopolitical and Rate Concerns

Demand for commercial funding declined in the first quarter of 2026, with advisers attributing the slowdown to geopolitical uncertainty and expectations around interest rates. Atom Bank’s latest SME Pulse report found a significant drop in the share of advisers reporting increased demand for funding.

According to Atom Bank, the proportion of advisers who said demand for commercial funding had increased fell from 61% to a third. Meanwhile, those reporting stable demand dropped from 61% in Q4 to 54% in Q1. Atom Bank noted these figures represent a record high for unchanged demand and a record low for rising demand since the report began in 2023.

The report found that 86% of brokers attributed the cooling demand to either higher interest rates or economic uncertainty. Among brokers who did see increased demand, 58% cited more product options and 32% pointed to lender appetite as reasons.

When asked about the impact of the conflict in the Middle East, 49% of brokers said their clients were concerned about the fallout, while 23% were not worried. Over half (51%) of brokers said the conflict made it more difficult to advise clients on the outlook for external finance. Additionally, 65% of brokers said the revised outlook for interest rate rises had directly led to a decline in demand for funding.

Small Loan Market and Access to Finance

The SME Pulse also highlighted ongoing demand for small commercial loans. 47% of brokers reported receiving weekly enquiries for loans between £100,000 and £250,000, and 19% received such enquiries daily. However, 83% of respondents said there should be more lenders in this part of the market. Atom Bank has responded by lowering its minimum commercial mortgage size twice this year, first to £200,000 and then to £100,000.

Recent SME Pulse reports have indicated improving access to funding, but the Q1 survey showed that 19% of brokers encountered issues accessing finance, up from 11% previously. While brokers noted more active lenders and better choices, some said the underwriting process had become more challenging, particularly regarding affordability assessments.

These findings are relevant for UK letting agents and inventory clerks monitoring commercial property trends, as shifts in funding demand and lender activity can impact the broader property market.