Short Term Lending Interest Rates
Interest Rates Secured Short-Term Lending
Interest rates on bridging loans are quoted differently from any other type of property finance. They are expressed as monthly percentages rather than annual rates, they vary dramatically depending on factors that do not affect mortgage pricing, and the way interest is charged — rolled up, retained, or serviced — fundamentally changes the total cost of the facility. This guide explains how bridging loan interest rates work, what drives the rate you are offered, and how to compare lender quotes accurately so you are never paying more than you should.
How Bridging Loan Rates Are Quoted
Bridging loan rates are always quoted as a monthly percentage — for example, 0.55% per month or 0.75% per month. This is because bridging loans are short-term facilities (typically 1-24 months), and quoting an annual rate would be misleading for a product that may only be held for 4 or 6 months.
To convert a monthly rate to an annual equivalent, multiply by 12. A rate of 0.65% per month is equivalent to 7.8% per annum. However, this simple multiplication slightly understates the true annual cost because it does not account for compounding (interest charged on interest when interest is rolled up). The true annualised cost on a rolled-up facility at 0.65% per month is closer to 8.1% — a small but meaningful difference on large loans.
What Determines the Rate You Are Offered
Loan-to-Value Ratio (LTV)
LTV is the single biggest factor affecting your rate. A bridging loan at 50% LTV carries significantly less risk for the lender than one at 75% LTV — if the borrower defaults, the lender has a much larger equity cushion to absorb any loss on sale. Typical rate bands in the current market are 50% LTV and below: 0.45-0.55% per month, 50-65% LTV: 0.55-0.70% per month, and 65-75% LTV: 0.70-0.95% per month. These are indicative ranges — individual lender pricing varies based on all the factors in this guide.
Property Type and Location
Lenders price risk, and property type directly affects risk. Standard residential property in established areas like Chelsea, Kensington, Hampstead, Richmond, Clapham, and Balham attracts the lowest rates because these properties are highly liquid — they sell quickly and for predictable prices. Non-standard properties — HMOs in Hackney, commercial premises in Lewisham, development sites in Tottenham, hotels, care homes, and leisure properties — attract higher rates because they are more complex to value and harder to sell if the lender needs to recover the loan.
Location within London also matters. A flat in Mayfair at 60% LTV will attract a lower rate than an identical LTV on a flat in Barking — not because of the borrower, but because the Mayfair property is more liquid and its value is more stable.
Borrower Profile
While bridging is primarily asset-based, the borrower’s profile still affects pricing. Experienced property investors with a track record of successful bridging transactions receive better rates than first-time users. Borrowers with clean credit histories receive better rates than those with adverse credit (CCJs, defaults, IVAs). UK-resident individuals receive better rates than offshore entities or non-UK residents, reflecting the additional compliance costs and perceived risk.
Loan Size
Larger loans often attract lower rates because the lender’s fixed costs (legal, admin, compliance) are spread across a bigger facility. A £3 million bridge for a property in Notting Hill may attract 0.50% per month, while a £200,000 bridge for a property in Croydon may attract 0.85% per month — even if the LTV is the same — because the economics of the smaller deal are less attractive to the lender.
Charge Position
First charge bridging loans (where the lender holds the primary security against the property) attract lower rates than second charge facilities (where another lender already holds the first charge). Second charge bridging rates are typically 0.10-0.25% per month higher than first charge on the same property, reflecting the lender’s subordinate position in the security stack.
Exit Strategy Strength
A borrower with a confirmed mortgage AIP for a refinance exit will receive a lower rate than one with an unconfirmed exit. A borrower selling a property in Wimbledon Village with 3 viewings already booked will receive better terms than one selling in an untested market. Lenders price certainty — the more certain your exit, the lower the rate.
How Interest Is Charged
Rolled-Up Interest
The most common structure. Interest accrues monthly and is added to the loan balance. You make no payments during the term — the interest is repaid along with the capital when the facility is redeemed. This is ideal for refurbishment projects where the property generates no income during the works, and for borrowers who want to preserve cash flow during the bridge period.
The cost implication: you pay interest on the accumulated interest. On a £1 million bridge at 0.65% per month held for 12 months, simple interest would be £78,000 (£1m × 0.65% × 12). Rolled-up interest (compounded monthly) would be approximately £80,700 — a difference of £2,700. On shorter terms (3-6 months), the compounding effect is negligible.
Retained Interest
The lender deducts the total expected interest from the loan advance at drawdown. If you borrow £1 million at 0.65% for 12 months, the lender retains £78,000 at drawdown and you receive £922,000 in net funds. The advantage is certainty — you know the exact total cost upfront. The disadvantage is that you receive less cash on day one, and if you repay early, you must apply for a refund of the unused retained interest.
Serviced (Monthly) Interest
You make monthly interest payments during the term, similar to a mortgage. The capital is repaid in full at redemption. This is less common in bridging but available from some lenders. It suits borrowers who have rental income from the property during the bridge term — for example, purchasing a tenanted buy-to-let in Islington or Bermondsey where the rental income covers the monthly interest payments.
The Total Cost: Beyond the Interest Rate
Comparing bridging loans on interest rate alone is a mistake. Two lenders quoting the same monthly rate can have very different total costs depending on the arrangement fee (typically 1-2% of the loan), exit fee (0-1.25% — some lenders charge nothing, others charge 1.25%), valuation fee (£500-£3,000+ depending on property type and value), legal fees (£2,000-£5,000 for standard residential, more for complex cases), and broker fee (at Platinum Global, no fee on facilities of £500,000 or above).
Always compare the total cost of the facility over your expected holding period, not just the headline rate. A lender offering 0.55% per month with a 2% arrangement fee and a 1.25% exit fee may cost more in total than one offering 0.65% per month with a 1% arrangement fee and no exit fee — depending on how long you hold the loan.
Worked Comparison: Same Property, Three Different Lenders
Property: 3-bed Victorian terrace in Fulham. Purchase price: £1,200,000. Loan: £840,000 (70% LTV). Expected term: 6 months.
Lender A: 0.55%/month, 2% arrangement fee, 1.25% exit fee. Interest: £27,720. Arrangement fee: £16,800. Exit fee: £10,500. Total cost: £55,020.
Lender B: 0.65%/month, 1.5% arrangement fee, no exit fee. Interest: £32,760. Arrangement fee: £12,600. Exit fee: £0. Total cost: £45,360.
Lender C: 0.70%/month, 1% arrangement fee, no exit fee. Interest: £35,280. Arrangement fee: £8,400. Exit fee: £0. Total cost: £43,680.
Lender C — with the highest headline rate — is actually the cheapest over 6 months because of its lower arrangement fee and no exit fee. This is why comparing total cost matters more than comparing headline rates.
How Rates Have Changed Over Time
Bridging loan rates are influenced by the Bank of England base rate, the cost of funding for bridging lenders (many of whom fund their loan books from institutional credit lines), and competition within the bridging market. Between 2021 and 2023, rates increased as the base rate rose from 0.1% to 5.25%. Through 2024 and into 2025-2026, rates have stabilised as lender competition has intensified and funding costs have normalised. The current market offers some of the most competitive bridging rates in several years, particularly for prime residential property in London at conservative LTV.
Frequently Asked Questions
What is the lowest bridging loan rate currently available?
From 0.45% per month for prime residential property at 50-60% LTV with a strong exit strategy and clean credit. This is available on properties in areas like Mayfair, Belgravia, Chelsea, Knightsbridge, Hampstead, and Richmond where the property is highly liquid and the borrower profile is strong.
Can I negotiate the rate?
Yes. Rates are not fixed — they are set by the lender’s credit committee based on the specific deal. A specialist broker who places regular volume with a lender has significantly more negotiating leverage than a direct applicant. We negotiate rates and fees on every facility we arrange.
Is the rate fixed or variable?
Most bridging loan rates are fixed for the term of the facility. Unlike variable-rate mortgages, your monthly rate does not change if the Bank of England base rate moves during your bridge term. This provides cost certainty for the duration of the facility.
Do I pay interest from day one?
Yes. Interest accrues from the date of drawdown. If your facility completes on the 15th of the month, you pay interest for the remaining days of that month (pro-rated) plus full months thereafter. Most lenders calculate interest on a daily basis — so if you repay on day 47, you pay exactly 47 days of interest, not 2 full months.
Does Platinum Global charge a fee?
No broker fee on facilities of £500,000 or above.
Get a Rate Comparison
Platinum Global Bridging Finance compares rates and total costs across 100+ lenders for every enquiry. Whether you are purchasing in Battersea, refinancing in Stratford, or breaking a chain in Dulwich Village, we identify the cheapest total-cost option for your specific requirement — not just the lowest headline rate. Contact us at 64 Knightsbridge, London for indicative terms within 24 hours.