Bridging Loan Rates: honest ranges, not marketing numbers

The monthly interest rate is the number everybody asks about first, and it is the least useful figure in a bridging quote. Two lenders can both quote 0.79% a month on the same property and produce total costs thousands of pounds apart. The cheaper one is often the one with the higher headline rate.

So this page sets out what bridging finance actually costs. Every charge in the order it arrives, the three ways the interest can be structured, how early repayment rebates work in practice, and why the rate on its own tells you so little. It finishes with what sets pricing at the lender's end, which is the part that explains why some lenders are structurally cheaper than others and always will be.

What bridging loan rates are

Monthly rates across the short-term market broadly run from around 0.55% to 1% a month on a first charge against standard residential property. Pricing goes above that for commercial security, heavy refurbishment, second charges and anything more difficult.

As a rough map:

Rates are quoted monthly because the terms are short. 0.85% a month is not 0.85% a year. Over twelve months it is a little over 10% of the balance before any fees, and that is the figure to hold in your head when you are working out whether a project carries its finance costs.

Of the 67 short-term lenders we track (our wider panel runs to over 120 lenders across all product types), 50 publish a rate to start from. The other 17 publish nothing at all and price every case individually.

Every cost on a typical deal, in the order it hits

Bridging is not expensive because of the interest rate. It is expensive because of how many separate charges there are, and several of them are easy to miss until they turn up on a redemption statement.

Before completion, out of your own pocket

Valuation fee, roughly £400 to £1,500 on a house. Paid up front by almost every lender, non-refundable, and payable whether the loan goes ahead or not. Commercial and unusual property costs considerably more. Where a lender accepts a desktop valuation or an automated model the cost drops or disappears, but that is restricted to straightforward residential security and usually to lower loan to value tiers. A handful of lenders will lend with no valuation at all below a certain loan to value on standard houses.

Commitment or application fee, £500 to £1,000 where it applies. Charged by a minority of lenders at full application, before the valuation and searches are instructed. That is real money at risk before you hold an offer, so establish whether it applies before you commit to a lender.

Your own solicitor, commonly £1,000 to £2,500 plus VAT and disbursements. More on a leasehold title, a defective title, or anything with an unusual structure.

Deducted from the loan on completion

These do not come out of your pocket, but they reduce what reaches your solicitor, which comes to the same thing.

Arrangement fee, 1.5% to 2% of the gross facility. Two per cent is the market standard. A small number of lenders charge 1% on straightforward bridging, and some apply a minimum, commonly £995 to £1,800, which makes the effective percentage much higher on a small loan. A £1,800 minimum on a £100,000 loan is a 1.8% fee. On a £60,000 loan it is 3%.

Lender administration or set-up fee, £250 to £2,000. A separate charge from the arrangement fee and frequently missed. Some lenders tier it by loan size, for example £795 below £700,000 and £1,350 above.

The lender's legal costs, commonly £1,000 to £2,000 including VAT on a straightforward residential case, and more where the title is complicated or there is more than one security. You pay for the lender's solicitor as well as your own. Where dual representation is available, one firm acts for both sides, which saves money and time.

Title insurance or indemnity fee, £100 to £500. Used instead of full local authority searches where the timescale will not allow them. Some lenders also carry their own insurance indemnity fee that does not show up in the published tariff.

Telegraphic transfer fee, £25 to £50 per transfer. Small, and it appears again on redemption.

Broker fee, which varies, and which has to be disclosed to you in writing before you commit.

Retained interest, where that structure is used. Covered in the next section, and usually the largest single deduction of the lot.

On redemption, at the end

Exit fee, where it applies. This is the charge that most often turns a cheap-looking deal into an expensive one. Of the lenders we track only a small number charge one on standard bridging and most explicitly do not. Where it exists it is commonly 1% or one month's interest.

The detail that matters is the basis. An exit fee calculated on the gross facility rather than the balance outstanding is considerably more expensive than it sounds, and on some products it applies even if you repay in month three.

Notice where exit fees cluster. They are more common on refurbishment and development products than on plain bridging. One lender charges 1% on its refurbishment products and nothing on its standard bridge. Another charges one month's interest on loans up to £100,000 and nothing above, so crossing £100,000 removes the exit fee and drops the rate band at the same time.

The lender's legal costs on redemption, £250 to £450. Separate from the legal costs at the outset.

Redemption administration fee, £100 to £250, plus a further charge for second and subsequent redemption statements requested inside a month.

Transfer fee on redemption, £25 to £50.

Extension fee if you need more time, commonly from 1% of the balance, and more where the extension was not agreed in advance. One published tariff charges 1% for an agreed extension and 1.25% where it is not.

What it adds up to

On a £200,000 net facility over twelve months, expect total costs somewhere between £28,000 and £33,000 depending on the structure. Interest is the bigger share, usually 70% to 80% of it, with the fees making up the rest. The fees are the part you can influence by picking the right lender. The interest is largely set by the loan to value and the security.

Retained, rolled up or serviced interest?

Three structures, and the choice changes both your cash position and the total cost. Most lenders offer at least two of them. Some offer only one.

Retained interest

The lender works out the interest for the full term at the outset and holds it back from the advance. You make no monthly payments at all.

Who it suits. Anyone without the income to service monthly payments, which covers most bridging borrowers. An empty property produces no rent, a refurbishment produces no income until it is finished, and somebody bridging between houses is usually already carrying a mortgage.

The catch. It reduces what you receive, substantially. Twelve months of retained interest at 0.85% on a £230,000 gross facility is about £23,500 straight off the top. It is also why a 75% gross facility nets down to 60% to 65% of the property value.

The detail to check. On a lot of products the retained sum does not reduce the balance that interest is charged on, so you are charged interest on the interest. The illustration shows the effect, but nobody points it out.

Rolled up interest

Interest is added to the balance each month instead of being deducted at the start. No monthly payments, and nothing held back on day one.

Who it suits. Borrowers who need the maximum cash on completion and are confident about the term. Because nothing is retained, the day one advance is higher than the same facility on a retained basis.

The catch. The balance compounds. The longer it runs the faster it grows, and your loan to value at redemption is higher than it was at the start. On a facility that overruns, this is where equity disappears.

Availability. Fewer lenders offer it than offer retained, and some will only roll up to a lower maximum loan to value, because they are underwriting the end balance rather than the opening one.

Serviced interest

You pay the interest monthly out of income, like an interest-only mortgage.

Who it suits. Borrowers with provable income that covers the payments. Usually that means a property already tenanted, a business generating cash, or income from somewhere else entirely. It produces the largest net advance of the three, because nothing is deducted and nothing compounds.

The catch. You have to evidence the income, which a lot of bridging borrowers cannot, and then you have to make the payments. A missed payment on a bridging loan escalates faster than on a mortgage, with monthly arrears fees commonly £250 and default notices at a similar level.

A hybrid worth asking for. Some lenders will part service and part retain, for instance servicing from the rent on a tenanted property and retaining the rest. It is not always advertised.

Repaying early: minimum terms and how rebates work

This is where bridging compares surprisingly well against other borrowing, and where the gap between lenders is widest.

Early repayment charges are unusual. Most short-term lenders have none. What they have instead is a minimum interest period.

Minimum terms run from one month to three months. Where the minimum is one month you can repay in week two and pay one month's interest. Where it is three months you pay three months whatever happens. On a £230,000 facility at 0.85%, the difference between a one month and a three month minimum is about £3,900 if the loan redeems quickly. Some lenders apply no minimum at all.

How the rebate works. On a retained interest loan the lender has already taken the full term's interest out of your advance. When you redeem early the unused portion reduces your redemption figure. You do not get a cheque. You simply owe less.

The rebate basis is the thing to get in writing, because the variations matter:

• Daily from the start. The best outcome. You pay for the days you used, subject only to the minimum period
• Daily after a stated month. Common. One lender rebates daily for loans repaid after month three, so the first three months are charged in full regardless
• Whole months only. You pay for complete months, so redeeming on the second day of month seven costs seven months
• No rebate. Rare on bridging, but it exists, and it makes the headline rate meaningless

On a rolled up loan the question does not arise the same way, because the interest accrues as you go. On a serviced loan you just stop paying.

What that means in practice. Where the rebate basis is good, taking a longer term than you expect to need costs very little and removes the risk of needing an extension at 1% of the balance. A twelve month facility redeemed in month five generally costs about five months of interest. Taking six months to save on the headline and then needing an extension is usually the more expensive route.

Why two lenders quoting the same rate cost different amounts

This is the whole point of the page. The monthly rate is one of at least seven variables, and the other six routinely outweigh it.

The basis of the loan to value. A gross figure includes the fee and the retained interest. A net figure is the money in hand. A lender offering 70% net is lending more actual cash than one offering 75% gross, and a borrower comparing 75% against 70% will usually pick the wrong one. Our bridging calculators will show you the gap on your own numbers.

Whether there is an exit fee, and what it is calculated on. One per cent of the gross facility on a £230,000 loan is £2,300. On a six month deal that is the same as adding roughly 0.17% a month to the rate.

The admin fee. The gap between a £250 administration fee and a £1,995 one is £1,745, which on a short loan is worth more than a 0.10% difference in rate.

The minimum interest period. Three months against one month, on a loan that redeems quickly, is worth more than any plausible rate difference.

The rebate basis. Daily from day one against daily after month three changes the cost of an early redemption by thousands.

Whether the interest compounds. Interest charged on retained interest costs more than interest charged on the drawn balance, at the same headline rate.

Whether interest runs daily or monthly. A lender charging daily interest and a lender charging a full month on the day you redeem produce different figures at the same rate.

A worked comparison

Two lenders, same property, same borrower, same requirement. You need £200,000 net on a property worth £320,000, over twelve months.

Lender A quotes 0.79% a month, a 2% arrangement fee, a £1,995 administration fee, a 1% exit fee on the gross facility, and a three month minimum interest period.

Lender B quotes 0.89% a month, a 2% arrangement fee, a £795 administration fee, no exit fee, and a one month minimum.

A is 0.10% a month cheaper on the headline. Here is what actually happens:

Lender B is cheaper at every point, on a rate 0.10% higher. Over the full twelve months the gap is £520. At month six it is £1,983. At month three it is £2,715.

The reason the gap widens the earlier you repay is that the exit fee and the administration fee are fixed. They do not shrink when the loan is short, so on a short loan they are a bigger share of the total. A rate advantage only builds up over time, and on a three month loan there is barely any time for it to build up at all.

That is the single most important thing to understand about bridging pricing. The shorter the loan, the less the rate matters and the more the fees matter. And most bridging loans redeem well before their stated term.

So the question to ask a lender is not what the rate is. It is two questions. What reaches my solicitor on completion, and what do I pay to redeem in month X.

What pushes a rate up

Loan to value, which is the biggest driver by a distance. The gap between a 65% tier and a 75% tier with the same lender is commonly 0.05% to 0.10% a month, and it widens at the top of the range. Dropping below a tier threshold is frequently the cheapest thing a borrower can do.

Property type. Standard houses price cheapest. Flats, particularly in large blocks or above commercial premises, price above them. HMOs, multi-unit freehold blocks, semi-commercial and commercial each add to the rate. Land prices highest of all, and at much lower loan to values.

The condition of the property. Habitable prices below uninhabitable. Light refurbishment prices below heavy, usually by 0.15% to 0.20% a month. Anything structural, anything needing planning consent, and anything splitting one dwelling into several moves into a different product altogether.

Location. Most lenders cover England and Wales. Roughly half lend in Scotland, where a separate legal system applies, and only a small minority lend in Northern Ireland. A smaller panel means less competitive pricing. Some lenders apply postcode restrictions, avoid remote areas, or cut the maximum loan to value outside major population centres.

Credit history. Short-term lending is far more tolerant than mainstream lending and many lenders do not credit score at all, but adverse credit narrows the panel and the lenders left will price for it. Heavy adverse is usually placeable where the exit is a sale rather than a refinance.

The exit. A sale with the property already on the market and offers in prices better than a refinance that depends on a valuation uplift that has not happened yet. An exit that relies on planning being granted, or on another lender agreeing to something in future, prices highest or gets declined.

First or second charge. Second charges price above first charges, and there is a section on that below.

Regulated or unregulated. Not a reliable indicator either way. Some lenders price regulated above the equivalent unregulated loan to reflect the extra process. At least one prices regulated cheaper at every tier. Do not assume it.

Borrower profile. Foreign nationals and expats carry a premium with most lenders who accept them. First-time borrowers are accepted widely but usually at lower maximum advances, which costs you in cash even where the rate is the same.

Speed. A lender asked to complete at the fast end of the market may price for it, though more often the constraint turns up as a requirement rather than a rate.

What pulls a rate down

A lower loan to value. The most effective lever you have. Put in more deposit, or borrow less, and you move down a tier. The saving is immediate.

A strong, evidenced exit. A property under offer, an agreement in principle for the refinance, a sale with a completion date. Lenders price risk, and an exit they can verify is less risky than one they have to take on trust.

Experience. A lot of lenders tier their advances by track record, with the higher tiers kept for borrowers who can evidence completed projects of a similar type. Evidencing two or more similar schemes can be worth several percentage points of loan to value.

Additional security. Offering a second property, particularly an unencumbered one, cuts the loan to value across the combined security and can move the whole deal into a cheaper band. Be realistic about the arithmetic though. A second charge behind an existing mortgage typically tops out at 65% to 70% of value, so a heavily mortgaged property adds very little.

A clean, straightforward property. Standard construction, good title, no short lease, no knotweed, vacant possession or a clean tenancy.

A shorter term, where the lender prices by term. Not all do, but some tier by duration.

Scale. Larger loans frequently attract better pricing, and crossing a threshold can drop the rate and the fees together. One lender's exit fee falls away entirely above £100,000.

Energy efficiency. A small but growing number of lenders offer a discount or a rebate linked to the EPC rating of the finished property.

Competition. A lender who knows it is being compared against two others prices differently from one who knows it is the only option. That is most of what a broker is actually doing.

Why second charge pricing is different

Second charge bridging is meaningfully dearer than first charge, and the maximum loan to value is lower. Around half the lenders we track will consider one at all.

The pricing gap is typically 0.15% to 0.40% a month above the equivalent first charge, and on some products more.

The loan to value drops, usually to somewhere between 55% and 70% including the first charge. Published positions among the lenders we track include 75% on a first charge falling to 65% on a second, 75% falling to 70%, and one lender capping second charges at 55% by referral only.

Why. On enforcement a second charge holder is paid only after the first charge lender has been repaid in full, including their costs. If the property sells for less than expected, the second charge takes the loss first and can take all of it. The lender is in a structurally worse position and prices accordingly.

The practical constraint is usually consent, not price. You normally need the first charge lender's cooperation, by way of a deed of priority or a letter of consent, and some first charge lenders simply refuse, or take weeks about it. Expect a deed of priority fee, commonly around £350, plus the solicitors' costs of putting it in place. A few lenders will issue an offer before consent is obtained, which saves time but does not remove the requirement.

And the arithmetic is usually the real problem. A property worth £300,000 with £180,000 outstanding has a ceiling at a 70% cap of £210,000, so £30,000 of gross headroom. After a 2% arrangement fee and twelve months of retained interest the net advance is around £25,000, and less again at the higher end of second charge pricing. Borrowers routinely expect more from a second charge than the structure can deliver.

What actually sets the rate at the lender's end

Lenders are not pricing arbitrarily. The rate a lender can offer is largely decided by where its money comes from, and that is why some lenders are structurally cheaper than others and always will be.

Banks with deposit-taking licences fund lending partly from customer deposits, which is the cheapest money available. These lenders tend to sit at the bottom of the rate range, and they tend to have the most conservative criteria, the slowest processes and the largest minimum loan sizes. You are buying a cheap rate with time and flexibility.

Lenders funded by institutional facilities borrow from a bank or an investment firm at a wholesale rate and lend it on at a margin. Their cost of funds sits above a deposit taker's but well below a private investor's. Several lenders in this category have substantial facilities behind them, in some cases hundreds of millions, which gives them both competitive pricing and the certainty to commit. The facility comes with covenants, which is why these lenders have firmer criteria than their flexibility suggests.

Lenders funded by private capital, family offices or investor notes have the highest cost of funds and the most flexibility. They price above the bank-funded lenders and they will look at cases others decline. This is where difficult security, unusual structures and awkward borrowers get placed, and the premium is the price of that flexibility rather than an inefficiency.

Lenders funded by peer-to-peer or retail investors sit in a similar position, with pricing driven by what they need to offer their own investors to raise the money.

Three practical things follow from that.

A cheap rate usually comes with firmer criteria. The lenders at the bottom of the range can afford to be selective precisely because their funding is cheap and plentiful.

Funding depth affects certainty, not just price. A lender with a large committed facility can commit to a drawdown date. A lender funding deal by deal from private sources may be slower to confirm, which matters when you are working to an auction deadline.

Rates move with the base rate, but not uniformly. Lenders funded from wholesale markets reprice when their own cost of funds moves. Privately funded lenders may not move at all. That is why the spread between the cheapest and the most expensive lenders widens and narrows over time.

Is there a rate card, or is it all case by case?

Both, and being straight about this matters.

Published rate cards exist and most lenders have one. Of the 67 lenders we track, 50 publish a starting rate. A typical card tiers by loan to value, by property type and by product, so a single lender may publish a dozen rates or more.

But every published figure is a rate from. It is the best case: the lowest loan to value tier, on the most straightforward security, to the strongest borrower. Treating the headline on a rate card as the price you will be offered is the most common mistake in comparing bridging finance.

Seventeen of the lenders we track publish nothing at all. They price every case on enquiry. That is more common among privately funded lenders and at the larger end of the market, and it is not a bad sign. It usually means the cases are too varied to tier.

And even where a card exists, it is a starting point. Pricing gets adjusted for the exit, the borrower, the security and the term. Lenders move off their card in both directions: up for risk, and down where they want the business, which happens more often than published material suggests.

Which is why you cannot compare bridging finance from websites. The published rates are not the rates, the published loan to values are usually gross, and the fee structures that decide the real cost are frequently not published at all. The only reliable comparison is a set of written terms on your own case, read in terms of the two questions that matter. What reaches your solicitor, and what you pay to redeem.

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