Bridging Loan Rates and Costs Explained

Bridging loan rates are quoted monthly, which makes them easy to underestimate. A rate of 0.75% per month sounds modest. On a £500,000 loan held for nine months, it produces £33,750 in interest before any fees. Understanding the full cost picture before you commit is not optional.

Current rates in 2026

At time of writing UK bridging loan rates range from around 0.55% per month for the strongest first charge applications at low LTVs, to 1.5% or more for second charge deals, adverse credit borrowers, or specialist property types. Most standard transactions price between 0.65% and 0.95% per month.

To give those numbers some meaning: 0.75% per month is approximately 9% per annum in simple interest terms. At 1.0% per month the annual equivalent is around 12.7%. These rates sit substantially above commercial mortgage rates, which currently range from around 5.5% to 9.5% APR. The premium reflects the short term, the higher risk to the lender if the exit fails, and the speed of arrangement. For context on commercial mortgage pricing, see commercial mortgage rates explained.

What affects your rate

LTV is the primary driver. A 50% LTV deal will attract a meaningfully lower rate than a 75% LTV deal because the lender has more equity cushion if the property needs to be sold quickly. Bridging lenders price LTV risk more aggressively than commercial mortgage lenders because the timeline for recovery, if things go wrong, is compressed.

Whether the bridge is open or closed affects pricing. A closed bridge, where the exit date is contractually fixed, attracts a lower rate than an open bridge. Lenders apply a risk premium to exits that are probable but not certain.

Property type matters. Standard residential and mainstream commercial property (offices, warehouses, retail) are well understood and priced at standard rates. Specialist assets, derelict properties, or anything with planning or title complications carry a higher rate to reflect the additional risk.

Credit history affects both availability and pricing. Clean credit and no adverse history will attract the market's best rates. Adverse credit narrows the lender panel and pushes the rate upward, though it does not automatically disqualify a borrower if the security and exit are strong.

Loan size can influence pricing. Larger loans (above £1 million) often attract finer rates because lender income is greater and competition between specialist lenders is stronger on larger tickets.

The full cost breakdown

Interest is only part of the cost of a bridging loan. A realistic total cost calculation needs to include:

• Arrangement fee: 1% to 2% of the loan amount, charged by the lender. On a £500,000 loan this is £5,000 to £10,000, typically deducted from the advance rather than paid upfront.

• Valuation fee: £500 to £2,000 or more depending on the property's size and complexity, paid directly to the surveyor.

• Lender legal fees: £1,000 to £2,500 in most cases, paid to the lender's solicitor and usually a condition of the loan.

• Your own legal fees: typically £1,500 to £3,000 for a straightforward bridging transaction.

• Exit fee: some lenders charge 0.5% to 1% of the loan on repayment. Not universal, but worth checking in the term sheet before you accept an offer.

• Broker fee: if you use a broker, expect 1% to 2% of the loan. Most borrowers should use a broker.

On a £500,000 loan at 0.75% per month, held for nine months, the total cost picture looks roughly like this: interest of £33,750, arrangement fee of £7,500, legal fees of around £4,000, valuation of £1,500, and a broker fee of £5,000. That is approximately £51,750 in total costs before any exit fee. More than 10% of the loan in nine months.

How interest structures affect the total cost

The way interest is charged affects both monthly cash flow and the total amount paid.

Monthly serviced interest is the simplest and cheapest structure. You pay interest each month and the balance stays static. Total interest equals rate multiplied by loan amount multiplied by months.

Retained interest means the full anticipated term's interest is deducted from the advance at drawdown. You receive less but have no monthly payments. Total interest cost is the same as serviced if you use the full term. If you repay early, most lenders will refund unearned retained interest, though check the terms.

Rolled-up interest accrues to the outstanding balance monthly, with everything repaid at the end. No payments are required during the term, but interest compounds. Over three months, the difference is negligible. Over 12 months at 0.75% per month, rolled-up costs around 3% more in total than serviced. Take the longest term only if you need it.

For a complete walkthrough of how the mechanics work at each stage, see how do bridging loans work.

How bridging costs compare to commercial mortgages

The cost difference between bridging and long-term commercial finance is significant. It is the central reason bridging should only be used where the situation genuinely requires it.

A £500,000 commercial mortgage at 7% APR costs around £35,000 in interest in year one. The same sum on a bridging facility at 0.75% per month costs £45,000 in interest over 12 months, plus several thousand pounds in fees. Bridging is the more expensive product by a meaningful margin.

That premium is justified when bridging solves a problem that commercial finance cannot: when speed is essential, when the property is unmortgageable in its current state, or when the transaction window does not allow a commercial mortgage application to complete in time. It is not justified as a substitute for commercial finance when no time pressure exists.

For a broader comparison of where bridging sits in the secured lending spectrum, see what is a secured business loan and secured vs unsecured business loans.