Bridge Loan Interest Rates: A UK Developer's Guide

Unlike residential mortgages, which quote interest annually, bridging loan interest rates are expressed as a monthly percentage. A rate of 0.75% p.m. is equivalent to 9% p.a. on a simple interest basis — though the true annualised cost depends on whether interest compounds and how long the facility actually runs.

In the current UK market, bridging loan rates typically range from around 0.55% p.m. for the most straightforward, low-LTV residential cases, to 1.5% p.m. or higher for complex commercial deals, second-charge arrangements, or borrowers with adverse credit. The majority of development-related bridging facilities fall between 0.65% and 1.10% p.m.

The monthly quoting convention exists because bridging loans are short-term instruments — typically running from one to 24 months. Expressing the rate per month makes it easier to compare the cost of a six-month facility against a twelve-month one. It also means the headline rate can appear deceptively low: 0.75% p.m. is 9% p.a. simple, which is meaningfully higher than most long-term mortgage products.

Bridging loans are provided by specialist non-bank lenders, challenger banks such as Shawbrook and Together, and private credit funds rather than high-street banks. This lender landscape means pricing varies considerably across the market — two lenders may quote a spread of 0.25% p.m. on identical security, which over twelve months represents a substantial difference in total cost. The same mix of lenders also sits alongside developers in the market for light refurbishment, heavy refurbishment, and construction finance products, where pricing logic follows broadly similar risk-based principles.

Before comparing interest rates, it is worth being clear on what a bridging loan actually is. A bridging loan is a short-term, secured loan — typically running from one to 24 months — used to fund a property purchase, refurbishment, or development scenario where longer-term finance is not yet available. Like any secured property loan, the lender takes a first or second legal charge over the security property, and that charge is what supports the advance.

Bridging loans are assessed primarily on the security and the exit strategy rather than on monthly income. A developer with no PAYE salary but a strong scheme, sensible leverage, and a clear refinance route onto development finance or a term mortgage is a better bridging candidate than a high-earning individual with an unclear plan for repaying the loan. This asset-and-exit emphasis is what allows bridging to price differently from a residential mortgage — and, crucially, what drives where your specific deal sits on the rate card.

The product sits between commercial mortgages (long-term, lower rate, slower) and specialist funding such as development finance (staged, GDV-based, designed for ground-up construction). Because it is short-term, the monthly interest rate looks high at headline level but the absolute cost can be reasonable if the facility runs only for the period it is genuinely needed. That context matters when you start comparing the rate quotes discussed in the next sections.

Lenders price bridging facilities based on a combination of security quality, loan-to-value ratio, exit strategy strength, and overall deal risk. Understanding these levers helps you present your application in the strongest possible light.

LTV is calculated against the lender's independent valuation of your security property — not the purchase price you paid, nor your own estimate of current worth. This is why the RICS valuation sits at the centre of your pricing: a valuation that comes in below your expectation pushes your effective LTV upwards and your interest rate with it. Understanding how valuers approach your asset class is therefore directly relevant to the rate you will be offered. See our guide on RICS Red Book valuations for development for a detailed explanation of the methodology.

Beyond LTV, the following factors influence rate: property type (residential security attracts the keenest rates; commercial, mixed-use, HMO, and land carry a premium); exit strategy certainty (a contracted sale or approved refinance provides more certainty than an anticipated sale without evidence); loan term (very short facilities of one to three months may attract a minimum interest period charge equivalent to three months, making the effective rate higher); borrower experience (a developer with a track record of completed projects is perceived as lower risk); and loan size (facilities above £1m or £2m often attract preferential rates as specialist lenders compete for larger tickets).

One of the defining features of bridging finance is the flexibility in how interest is structured. Unlike a mortgage where monthly payments are obligatory from day one, a bridging loan can be arranged so that no cash leaves your account until you repay the facility in full.

Rolled-up interest is the most common method for property developers because it preserves working capital during construction or refurbishment. Be aware, however, that compounding can make a rolled-up facility more expensive overall than a serviced one at the same headline rate — particularly if the loan runs close to its full term. If you repay early, most lenders charge interest only for the months actually used, though some impose a minimum interest period of three months regardless.

For development exit bridging — where a developer has completed a scheme and is awaiting unit sales or a term refinance — rolled-up interest is almost universal. See our bridging loan service page for more on how different structures are matched to different project types, and compare the product against longer-term funding options in our guide on development finance vs bridging loans.

Because LTV is the primary pricing lever, the independent valuation of your security property is one of the most consequential steps in any bridging application. Lenders will instruct a RICS-qualified surveyor to produce a Red Book valuation. For bridging purposes, valuers typically report both an open market value and a 90-day restricted sale value — and many lenders base their LTV calculation on the latter, which is always lower.

A property valued at £800,000 on the open market might carry a 90-day restricted value of £680,000–£720,000. If your lender uses the restricted figure, a £520,000 loan represents 72–76% LTV rather than 65% — a material difference that can push your rate up by 0.15–0.30% p.m. and reduce the number of lenders willing to participate.

If a valuation comes in below your expectation, you have options: provide additional security to reduce the effective LTV; negotiate with the lender on the valuation basis; or commission a second opinion from a valuer with deeper experience in your specific asset class. Our guide on challenging a low development valuation sets out the process in full.

For development sites or part-completed projects, lenders and valuers apply the residual valuation method, which works backwards from the projected gross development value (GDV) — the completed, sold-out value of the scheme — to arrive at a supportable site value today. Understanding this approach, including the assumptions that drive it and how GDV-based pricing differs from OMV-based pricing, is important context when structuring a bridging application for a site acquisition or mid-build refinance. The same GDV lens underpins how development exit bridging is sized against a completed scheme awaiting sales. See the residual land valuation method explained for a detailed walkthrough.

The monthly interest rate is only one component of the total cost of a bridging facility. Before committing, borrowers should model the complete cost stack across the expected loan term — and apply a contingency for potential overruns.

To illustrate: a £500,000 bridging loan at 0.85% p.m. for nine months generates £38,250 in interest. Adding a 1.5% arrangement fee (£7,500), a £1,000 valuation, £1,500 in legal fees, and a 0.5% exit fee (£2,500) brings the total cost to approximately £50,750 — around 10% of the loan amount for a nine-month facility. This is within the normal range for short-term property finance; it becomes disproportionately expensive only when projects are delayed and the loan runs beyond its anticipated term.

For larger facilities, arrangement fees and rates are often negotiable as a package. On loans above £2m, specialist lenders compete actively on overall cost rather than applying a standard rate card — which is where working with a broker who has direct lender relationships provides measurable value over a standard comparison-site approach.

Bridging loans are not inexpensive, and they should never be used as a substitute for long-term finance where long-term finance is available. They are a tool for bridging a defined, time-limited funding gap: between site acquisition and planning consent, between construction completion and term refinance, or between exchange and completion where capital needs to move within days. Used for the right purpose with a clear, credible exit, the cost is proportionate to the problem solved.

Getting the keenest bridge loan interest rate requires more than submitting to multiple lenders simultaneously. Lenders price deals based on how they are presented: a complete information pack with a clear exit strategy, strong valuation evidence, and a credible development narrative will attract better pricing than an incomplete application that raises questions about risk or deliverability.

Key steps to securing a competitive rate: engage a specialist broker with direct lender access rather than a comparison platform; present a strong exit strategy with supporting evidence — exchange of contracts, heads of terms on a refinance, or comparable sales data for the intended disposal route; maximise the quality and marketability of your security where possible; and explore whether cross-collateral security from another asset could reduce your effective LTV and therefore your rate.

With access to over 100 lenders — including challenger banks, private credit funds, and specialist bridging lenders not available to borrowers directly — Construction Capital identifies which lenders are currently most competitive for your specific deal profile. Explore our bridging loans service or read our guide on development finance vs bridging loans to determine which product best fits your project and timeline.