Bridging Loan Rates Guide
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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in bridging loans
Bridging loan rates are lower than ever and with more and more entrants to the market, competition amongst lenders continues to grow. Bridging finance interest rates can vary widely depending on your situation, with several factors affecting the cost of your loan, such as the type of security and the loan to value requested.
Read on to learn more about available rates and fees or try our free bridging loan calculator to work out your costs. If you’d like to speak with an expert, then contact us and we’ll give you a call back to see how we can help you.
Understanding bridging loan rates
Bridging loan interest rates are expressed monthly, rather than annually, as is the case with secured loans, mortgages and personal loans. To give an accurate picture, bridge loan rates must be broken down by the type of security offered. Commercial bridging loan rates are higher than those secured against residential properties, and loans against land tend to command the highest rates.
Regardless of the type of security offered, our team of specialist brokers are on hand to help you secure the best bridging loan deal. Regardless of the type of security offered, our team of specialist bridging loan brokers are on hand to help you secure the lowest monthly interest rates.
What are typical bridging loan rates?
Residential bridging finance rates start from 0.39% per month, although this rate is only available up to a maximum of 50% Loan to value (LTV).
Due to the individual pricing of loans and the number of bridging lenders out there, it is hard to quote an average monthly interest rate. In general, most loans will fall between 0.43% and 1.25% per month. Below, we break down the factors that affect all the costs, and how you can secure the best deal.
Commercial bridging loan lenders tend to price each loan on risk, they will look at the type of property, location and you as the client. The best commercial bridging rates also usually start at around 0.39% per month.
As a guide, an interest rate of 0.85% per month is a good benchmark. For a riskier deal, such as an unusual property or an applicant with heavy adverse credit, rates will be around 1% – 1.35% per month. While rates are very important, the overall cost and your gross loan amount (where interest is added) must be considered.
Finally, loans against land will usually be priced between 0.9%-1.25% per month. As each application is judged on its own merits, we do sometimes secure lower than standard rates if the risk is low for the lender.
Below is a quick guide to bridging loan rates by security type:
| Bridging loan type | Maximum LTV | Rates From |
|---|---|---|
| Regulated bridging loans | 75% | 0.41% per month |
| Residential | 85% | 0.39% per month |
| Semi-commercial | 75% | 0.39% per month |
| Commercial | 75% | 0.39% per month |
| Land | 65% | 0.39% per month |
| Property refurbishment | 85% | 0.39% per month |
The lowest rates are usually reserved for LTVs below 50%
Most lenders heavily base their interest rates on the required LTV. The more you’re looking to borrow as a percentage of the value of security offered, the higher the rate you’ll end up paying.
While rates climb steady as the LTV required increases, the lowest rates on bridging loans are usually offered on applications that sit at, or below 50% LTV.
How can I get a lower rate on my bridge loan?
By putting down a larger deposit, thereby reducing your net loan amount and LTV, you may well fall into a product tier with lower monthly interest payments.
But remember, it’s counterproductive to stretch yourself too much in an attempt to reduce your loan to value if it means you’re putting a great strain on yourself financially.
Another way to reduce your loan to value is to offer additional security to the lender by way of a charge over another property in addition to the main security property.
How to choose the best bridging finance product
Securing a low interest rate tends to be the number 1 request by clients looking for bridging finance, but it is important to see the bigger picture.
The difference in fees charged by each lender can be vast. Many lenders will charge additional fees on each bridging loan application for things such as fund management, redemption or administrative fees. Other fees to consider include valuation fees, lender’s legal fees, lender facility fee (also known as a facility fee or arrangement fee), redemption fee and admin fees.
If you’re determined to save money, a comparison of all the costs of a bridging loan product, not just the interest rate, is crucial.
Which lenders are currently offering the lowest bridging loan rates?
The lenders that currently offer the lowest bridging loan rates (correct as of March 2022) are:
| Lender | Rates from |
|---|---|
| Aspen Bridging | 0.39% per month |
| Precise mortgages | 0.41% per month |
| Octopus | 0.45% per month |
| United Trust Bank | 0.48% per month |
| MT Finance | 0.49% per month |
The factors that affect the rate you’re charged
It’s important that you understand the key factors that impact bridging loan interest rates. We explain them in detail below.
How does loan to value impact the rate I’m charged on my bridging loan?
As mentioned above, LTV is a big driver of bridge loan pricing. This is due to the reduced risk of financial loss for the lender should a borrower fall fail to repay the loan when agreed.
How does property type impact bridging loan rates?
Residential properties usually receive the lowest rates, with semi-commercial, commercial and then land each becoming more expensive. This is due to the liquidity of these assets – the more liquid an asset, the better security it is considered to be in the eyes of a lender.
How does the legal charge type impact bridging loan rates?
Bridging finance can be arranged on a 1st, 2nd or even 3rd charge loan basis. 1st charge loans tend to pay the lowest interest rates.
A second charge loan can either be arranged as a legal charge or an equitable charge. Equitable charges aren’t favoured by lenders, so loans set up in this way will usually have higher interest charges.
How does credit history affect bridging loan rates?
Lenders issue loans with the idea that they will get their money back, plus some profit by way of the fees and interest charged. When working with an applicant who has a strong credit rating, they can be more confident that this will be the case and will accept lower interest charges as a result.
How does the location of the security property affect bridging loan rates?
This factor comes down to the lender’s ability to exit the loan. Property in a location has a highly liquid property market, and an abundance of available lenders will generally get the best rates. These locations are considered to be most places in England and Wales, plus parts of Scotland.
Some lenders will offer low rates on loans in Northern Ireland too, but this is less common.
How does the reason for the loan affect bridge loan rates?
Where heavy refurbishment or development of the property will be undertaken during the term of the bridging loan, the rate charged will usually increase slightly.
Heavy refurbishment and development are generally considered to be structural work to the property. Cosmetic work is usually not an issue even on low rate products, but this can vary depending on the lender chosen.
Does a broker’s relationship with my chosen lender impact interest rates?
Some lenders will include an element of negotiation in their pricing. When you’re working with a broker who has a strong relationship with certain specialist lenders, they’re often able to leverage it to secure you a better deal, whether that’s negotiating the lender fee, legal costs, exit fees or other fees.