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Best Bridging Loan Rates
Bridging loans provide a fast and flexible solution for individuals and businesses in need of short-term finance. Whether you’re 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. In this guide, 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.
When considering applying for a bridging loan, the key aspect to consider is its viability. The most likely indicator of whether bridging finance is viable depends on the best bridging loan rates available at the time, which would be determined against your eligibility.
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, depending on the prevailing market conditions. Usually, a bridging loan ranges from 0 to 12 months, although there are times when the loan duration can be prolonged, given specific circumstances.
Typical bridging loan criteria are as follows:
- 0.55%–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, for example.
- 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 |
Factors That Affect Bridging Loan Rates
Several variables influence the rates you’ll be offered on a bridging loan. Understanding these factors 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.
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 |
| £110,000 | £124,836 |
| £120,000 | £135,948 |
| £130,000 | £147,060 |
| £140,000 | £158,172 |
Bridging Loan Rates Comparison
When comparing bridging loan rates, it’s important to look beyond just the interest rate. Here are additional elements to consider in your comparison:
- Fees: Upfront fees, such as arrangement fees, valuation fees, and legal fees, can significantly impact the overall cost of the loan.
- Repayment Terms: Some lenders offer more flexible repayment terms, which can be beneficial depending on your financial situation.
- Interest Payment Structure: Some bridging loans are offered with rolled-up interest (paid at the end of the term), while others require monthly interest payments. Choose the structure that fits your cash flow needs.
- Exit Fees: Some lenders charge an exit fee when the loan is repaid. Be sure to factor this into your comparison.
Use our calculator and get in touch with our team for expert advice on choosing the best bridging loan deal tailored to your specific situation.
Bridging loan arrangements
Our standard bridging loan LTV interest rates are:
| LTV Value | Interest Per Month |
|---|---|
| LTV up to 50% | Rates from 0.55% per month |
| LTV from 50% to 65% | Rates from 0.60% per month |
| LTV from 65% to 70% | Rates from 0.70% per month |
| LTV from 70% to 75% | Rates from 0.70% 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 you’re working out the arrangement fee for a bridging loan based on the given numbers, it’s crucial to keep in mind that the shortest loan duration is 30 days. Should you choose to settle the loan before this timeframe, you’ll still incur full interest for 30 days. Once the initial thirty-day period has elapsed, you’ll only be required to pay interest up until the date you’ve fully repaid the bridging loan.
The products outlined in the guide 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.
Short-term borrowing plan
- Borrow up to 60% LTV over 2 years
- Fixed arrangement fee of 2%
- Interest paid monthly or at the end of the loan term
It is important to note that our short-term borrowing plan typically takes longer to set up than a standard bridging loan and that the fees are somewhat higher than your usual 12-month loans.
Additional factors that influence bridging loan interest rates
The fees and rates levied by different lenders can vary considerably, and numerous factors will influence the amount of funds attainable and the corresponding interest rates offered for bridge loan finance.
By definition, these are as follows:
- The loan-to-value amount
- The type of property offered as security – residential or commercial accepted
- The condition and location of the property
- The type of legal charge you have on the property
- Your monthly income and ability to make the repayments
- Your credit history
- The duration of the loan
- The cost of lending and affordability of the loan from the lender’s viewpoint
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%.
Can I negotiate bridging loan rates?
Yes, many lenders are open to negotiation, particularly if you have a strong credit profile, a clear exit strategy, and a low LTV ratio.
Are there penalties for early repayment?
Some bridging loans come with early repayment penalties, while others do not. It’s important to confirm the terms with your lender before committing.
What happens if I can’t repay the loan on time?
If you cannot repay the loan by the end of the term, most lenders offer refinancing options or extensions. However, it’s crucial to discuss this with the lender before taking out the loan to understand your options.
Can I use a bridging loan for non-property-related purposes?
Yes, while bridging loans are commonly used for property transactions such as getting funds to buy a house, they can also be used for other financial needs, such as business cash flow or debt consolidation, depending on the lender’s criteria.
Bridging loan comparison
Ready to secure the best bridging loan rates tailored to your needs? Contact us today for a no-obligation consultation with our team of experts. We’ll guide you through the process, help you compare rates, and ensure you get the best deal for your unique financial situation
