Best Bridging Loan Rates
Bridging loans provide a fast and flexible short-term financial solution for individuals and businesses. Whether you are funding a property purchase before selling your current one, renovating a property, or handling other pressing financial commitments, understanding the cost structure and rates of bridging loans is essential. We break down the latest bridging loan rates in the UK, explore factors that impact those rates, and provide tips on securing the best deal.
The rates for bridging loans can be swayed by the Bank of England’s base rate and may fluctuate between 0.55% and 1.5% per month. Usually, a bridging loan ranges from 0 to 12 months, although there are times when the loan duration can be prolonged.
Typical bridging loan criteria:
- 55%–1.5% monthly interest rate.
- Arrangement fee of 1–2%.
- No exit fee (on certain products).
- Unlike a mortgage, there is no minimum term i.e., loans can be repaid after a day.
- 75% Loan to Value (LTV) – it is possible to increase to over a 100% LTV bridging loan with additional security.
The table below resembles a typical £100,000 bridging loan:
| Interest Rate | Monthly Interest |
|---|---|
| Rates from 0.55% | £550 |
| Rates from 0.70% | £700 |
| Rates from 0.75% | £750 |
| Rates from 0.85% | £850 |
| Rates from 0.95% | £950 |
| Rates from 1.00% | £1,000 |
| Rates from 1.05% | £1,050 |
| Rates from 1.10% | £1,100 |
| Rates from 1.20% | £1,200 |
| Rates from 1.25% | £1,250 |
| Rates from 1.50% | £1,500 |
Please note: monthly interest may vary depending on the value of the property.
Factors that affect bridging loan rates
Understanding factors that influence rates can help you negotiate better terms:
- Loan-to-Value Ratio (LTV): The higher the LTV ratio, the greater the risk for the lender. Lower LTVs often lead to lower interest rates.
- Credit Score: While bridging loans are not solely reliant on credit scores, a strong credit profile can result in lower rates.
- Type of Property: Residential properties generally attract lower rates than commercial or mixed-use properties, as they are perceived as lower risk.
- Loan Term: Shorter loan terms may have different rates compared to longer terms. Some lenders offer more favorable rates for shorter-term loans.
- Exit Strategy: Lenders prefer borrowers with a clear and solid exit strategy (e.g., sale of a property or long-term refinancing), which can result in a lower rate.
- Loan Amount: Larger loan amounts can sometimes come with more favorable rates, especially if the borrower has substantial equity.
- The Applicant: Considerations can be made in regards to; for example; the age of the applicant, if they are a first time buyer, are they a British Citizen.
- Property Location: The location of the property will also be considered in determining the loan rate.
Typical bridging loan repayment cost (based on a rate of 0.55%) over 12 months:
| Bridging Loan Amount | Repayment Amount (excluding broker fees etc) |
|---|---|
| £50,000 | £59,254 |
| £60,000 | £70,148 |
| £70,000 | £81,042 |
| £80,000 | £91,936 |
| £90,000 | £102,829 |
| £100,000 | £113,723 |
Bridging loan arrangements
Our standard bridging loan LTV interest rates are:
| LTV Value | Interest Per Month |
|---|---|
| LTV up to 55% | Rates from 0.55% per month |
| LTV from 50% to 60% | Rates from 0.56% per month |
| LTV from 70% to 75% | Rates from 0.66% per month |
We typically use the open market value of a property to determine the bridging loan LTV amount. However, these figures tend to be slightly higher than forced sales or 90-day valuations.
Lender facility fee or arrangement fee
| Amount Borrowed | Arrangement Fee |
|---|---|
| £75,000 to £150,000 | 2% |
| £150,000 to £750,000 | 2% |
| Over £750,000 | 2% |
When working out the arrangement fee for a bridging loan based on the given numbers, keep in mind that the shortest loan duration is 30 days. Should you choose to settle the loan before this timeframe, you still incur full interest for 30 days. Once the initial thirty-day period has elapsed, you are only required to pay interest up until the date you have fully repaid the loan.
The products outlined above have no exit fees, no default interest rates, no penalty fees, and no early redemption charges. Lenders may also offer certain deals with no arrangement fee whatsoever, depending on the size of the bridging loan and the borrower’s circumstances which can be determined using an online bridging calculator.
How are bridging loan interest rates calculated?
Bridging loan interest rates are typically calculated on a monthly basis, as these are short-term loans. For example, if the monthly rate is 0.65%, this would translate to an annual equivalent of 7.8%.
