Fixed vs Variable Bridging Rates: Which Saves You More?

Bridging loan rates are quoted monthly, not annually - a convention that makes direct comparison with other finance products tricky. A rate of 0.55% per month equates to approximately 6.6% per annum. Rates range from 0.55% to 1.5% per month depending on the LTV, property type, exit strategy, and borrower profile.

Rates can be structured as either fixed for the entire loan term, or variable (typically tracking the Bank of England base rate plus a margin). The choice affects your total cost, your certainty over repayments, and your flexibility to exit early.

With a fixed rate bridging loan, the monthly interest rate is locked in for the entire term. If you agree 0.75% per month on a 12-month bridge, your interest cost is predictable from day one regardless of what happens to base rates.

Fixed rates are typically 0.05-0.15% per month higher than the equivalent variable rate at the time of arrangement. This premium is the cost of certainty. On a £500,000 bridging loan over 12 months, the premium equates to £3,000-£9,000 in additional interest.

Most fixed rate bridges do not charge early repayment interest - you pay interest only on the months you use the facility. However, some lenders impose a minimum interest period (typically 3 months). Always check before committing.

Variable rate bridging loans are priced as a margin over the Bank of England base rate (e.g., base + 0.50% per month, or base + 5% per annum). As base rates move, your monthly interest cost moves with them.

When base rates are stable or falling, variable rates offer savings over fixed. When rates are rising, variable exposes you to increasing costs that can erode your project margins. In the current rate environment, this is a material consideration.

Variable rate bridges are more common in the institutional lending market and for larger facilities (£1M+). Smaller bridging loans from specialist lenders are more commonly offered on fixed terms.

Take a £750,000 bridging loan over 9 months. At a fixed rate of 0.75% p.m., total interest = £50,625. At a variable rate starting at 0.65% p.m. (base + margin) with base rate increasing by 0.25% during the term, total interest ≈ £47,250-£49,500 depending on timing.

In this example, variable saves £1,000-£3,000 in a stable rate environment. But if base rates had increased by 0.50% instead, the variable cost would exceed the fixed cost. The savings are real but uncertain.

The breakeven point is the rate at which the variable cost equals the fixed cost. Ask your broker to calculate this for your specific facility size and expected term.

Choose fixed when: base rates are expected to rise, your exit strategy has a defined timeline (e.g., sale already agreed or refinance offer in hand), you need certainty for cash flow planning, or the premium over variable is small (under 0.10% p.m.).

Fixed is also the safer option for less experienced borrowers who may not be tracking rate movements closely, or for projects where the margin is tight and a rate increase could make the deal unviable.

Choose variable when: base rates are stable or expected to fall, you plan to exit quickly (under 6 months), the variable margin is significantly lower than fixed alternatives, or you have a flexible exit strategy that allows you to accelerate repayment if rates increase.

Variable rates are particularly attractive at the start of an easing cycle, when the base rate is expected to decline over your loan term. In this scenario, your monthly costs reduce automatically without needing to refinance.

The interest rate is only one component of bridging loan cost. Arrangement fees (1-2%), exit fees (0-1.5%), valuation fees (£500-£2,500), and legal fees all contribute to the total cost of borrowing.

Some lenders offer lower rates but charge higher fees, and vice versa. When comparing fixed vs variable, ensure you are comparing the total cost of borrowing, not just the headline rate. Construction Capital provides total-cost comparisons across our lender panel to help you make the right choice.

For developers exploring other funding options, we also arrange equity and joint ventures and commercial mortgages. You may also find these guides useful: Valuation for HMO Conversions, Section 106 & Affordable Housing Finance Guide, Mezzanine vs Equity JV. When comparing property finance options, consider the regulatory framework: the Financial Conduct Authority (FCA) regulates certain types of lending, while RICS standards govern valuations across all product types. HM Land Registry registration applies to all secured lending, and Building Regulations compliance affects the exit valuation regardless of which finance product you use.