What a Bridging Loan Actually Costs in 2026: Rates, Fees and a Worked Example
- 3 days ago
- 10 min read
Work out the true all-in cost of a bridging loan in 2026, from the monthly rate to the fees you might miss.
Quick Answer
In 2026 a bridging loan in the UK typically costs somewhere between around 0.55% and 1% a month in interest, plus an arrangement fee of roughly 1.5% to 2% of the loan, with valuation, legal and sometimes exit fees on top. Because interest is charged monthly, the total cost depends heavily on how long you hold the loan.
A short bridge held for three months can cost a fraction of the same loan run for twelve, so the term and your exit plan matter as much as the headline rate. The worked example below shows what a typical bridge adds up to once every charge is counted.
Reviewed by Ben Stephenson, FCA authorised (FRN 496907) · 25+ years' experience · 4.9★ on Google. Updated: 23 July 2026.
Who Is This Guide For
Best for homeowners caught in a chain, landlords buying at auction, and investors refurbishing a property who want to understand what a bridging loan really costs, from the monthly rate to the fees, before they commit to a short-term deal in 2026.
Key Points
Interest is charged monthly, not yearly.
Budget for fees beyond the headline rate.
A short term keeps the total cost down.
Table of Contents
Why a bridge is priced by the month, not the year
Bridging finance carries a monthly interest rate rather than an annual one, and that single difference is the key to understanding what it costs. A rate of, say, 0.75% a month is not directly comparable to a mortgage quoted as an annual figure, because the bridge is built to be held for months, not decades. The number that matters is not the rate on its own but the rate multiplied by how long you actually keep the loan, added to the fees.
That is why two borrowers offered the same monthly rate can pay very different totals. Someone who repays in three months pays a quarter of what someone holding the same loan for twelve months pays in interest. Speed and flexibility are what you are buying, and the price reflects that. The Bank of England (June 2026) held its base rate at 3.75%, which feeds into pricing, but the bigger levers on a bridge are the loan-to-value, the property and the strength of your exit.
The market has grown quickly. The Association of Short Term Lenders reported member loan books above 10 billion pounds by the end of 2024, as more buyers and investors used short-term finance to move fast, often to rescue a broken property chain or hit an auction deadline. Used well, a bridge unlocks a deal that would otherwise fall through. The rest of this guide breaks down every part of the cost so you can weigh it against what the bridge achieves.
What shapes the monthly rate you are quoted
The rate you are offered is not plucked from the air. It reflects how much risk the lender is taking, and a handful of factors move it up or down. The loan-to-value is the biggest: a bridge at 50% of the property value is priced more keenly than one at 70% or 75%, because the lender has more equity to fall back on. Borrow less against the same property and the rate usually falls.
The property itself matters too. A standard house in a saleable location is cheaper to fund than an unusual or hard-to-value property, because the lender's own exit, if you cannot repay, is cleaner. Whether the loan is first charge, where the bridge is the only borrowing, or second charge, sitting behind an existing mortgage, also moves the rate, as a second charge carries more risk and tends to cost more.
Finally, the strength and clarity of your exit shapes both whether you are approved and what you pay. A well-evidenced sale or an agreed refinance reassures the lender and can earn better terms, while a vague exit pushes the rate up or leads to a decline. This is where a broker who places bridging regularly earns their keep, because terms vary far more between lenders than on a standard mortgage. Our full guide to how bridging finance works sets out the mechanics behind these levers.
Rolled up, retained or serviced: how the interest structure changes your bill
Bridging interest can be handled in three ways, and the choice affects both your monthly cash flow and the total you repay. The table below sets them out.
Interest option | What it means for your cost |
Rolled up | No monthly payments; interest is added to the balance and repaid at the end. Costs a little more overall but keeps outgoings at zero. |
Retained | The lender holds back the full interest from the loan upfront, so you receive less cash but make no monthly payments. |
Serviced | You pay the interest monthly like a mortgage, so the balance does not grow, but you need the income to cover it. |
Rolling up is the most common choice on projects where no income is coming in yet, such as a refurbishment before a sale. It keeps your monthly outgoings at nil while the bridge runs, at the cost of a slightly higher final figure because interest is charged on the accruing balance. Retained interest works similarly but is deducted at the start, which reduces the net amount you actually receive, something to plan for if you need every pound of the loan.
Servicing the interest suits borrowers with the income to pay monthly, because the balance does not grow and the total is usually a little lower. There is no single right answer, only the one that fits your cash flow and the project. A specialist broker can model each structure against your numbers so you can see the real difference before you commit.
The fees that sit on top of the monthly interest
The monthly rate is only part of the picture, and the fees are where a bridge that looked cheap can become expensive. Budget for every line below, not just the interest.
Arrangement fee: typically around 1.5% to 2% of the loan, often added to the balance.
Valuation fee: paid upfront, rising with the property value.
Legal fees: yours and the lender's, payable on completion.
Exit fee: charged by some lenders when you repay, often around 1%.
Broker fee: where charged, for sourcing and packaging the deal.
The arrangement fee is the largest of these and is usually a percentage of the loan, so it scales with how much you borrow. A lender advertising a low monthly rate but a high arrangement fee can work out dearer over a short term than one with a higher rate and a lower fee, which is exactly why comparing the all-in cost matters more than the headline number. Not every lender charges an exit fee, and where one applies it is worth knowing whether it is a flat sum or a percentage.
Valuation and legal costs are unavoidable and paid regardless of how the deal ends. On some cases, dual legal representation, where one firm acts for both you and the lender, reduces the legal bill and speeds completion. Under current FCA rules, all fees must be disclosed clearly before you commit, and on a regulated bridge you can refer a complaint to the Financial Ombudsman Service if a lender falls short. Ask for a full breakdown and read it against the term you expect to hold the loan. If your case involves works before a sale, our guide on refurbishment bridging shows how these fees fit a project budget.
A worked example of what a six-month bridge costs
Take an illustrative, composite example, not a quote or a personalised recommendation. A homeowner needs to complete on a new house before their current home sells, and borrows 200,000 pounds on a bridge at 70% loan-to-value against the new property. The monthly rate is 0.75%, the arrangement fee is 2%, and they roll up the interest so there are no monthly payments while the bridge runs.
Over six months the interest works out at roughly 9,000 pounds, the arrangement fee adds about 4,000 pounds, and valuation and legal costs together might add another 2,000 pounds or so, giving an all-in cost in the region of 15,000 pounds. When their original home sells four months in, they repay the bridge early from the proceeds and stop paying interest for the final two months, trimming the total.
The lesson is in the shape of the cost, not the exact figures, which depend entirely on your property, rate and term. The bridge cost a few thousand pounds but secured a purchase that would otherwise have collapsed, and the early repayment saved two months of interest. Weighed against a lost deposit and a broken chain, that can be money well spent. Note that the monthly rate here is the cost of the loan, not a stress rate; bridging is not stress-tested against a higher notional rate the way a residential mortgage is.
Hidden costs people forget to budget for
Beyond the headline rate and the obvious fees, a few costs catch borrowers out. The first is the gap between the gross loan and the net loan. The gross figure is the full loan including rolled-up interest and fees, while the net figure is the cash you actually receive. If you need a specific sum in hand, make sure you are quoting on the net amount, or you may find the usable money falls short.
The second is time you did not plan for. Interest is charged for every month you hold the loan, so a sale that slips or a refinance that takes longer than hoped quietly adds to the bill. Building a margin of a month or two into your exit, rather than assuming the best case, is cheaper than reaching the end of the term with no way to repay. If your exit is a remortgage, our guide to refinancing onto a longer-term deal is worth reading early. The Money and Pensions Service also offers free, impartial guidance on short-term borrowing if you want a neutral second view.
The third is paying interest on money that simply sits there. Drawing more than the project needs, or taking the full term when a shorter one would do, means paying for finance you are not using. Borrow only what you need, for only as long as you need it. A final, smaller cost is the redemption or admin charge some lenders apply when you repay, so check the terms before you draw the loan rather than after.
Three myths about what bridging costs
Bridging has a reputation for being eye-wateringly expensive, and while it is dearer than a mortgage, some of the fear is misplaced. Three myths are worth clearing up.
The first myth is that the monthly rate is the whole cost. In reality the fees, especially the arrangement fee, can rival a couple of months of interest, so the rate alone tells you little. The second myth is that a lower monthly rate is always cheaper. Over a short term, a low rate paired with a high arrangement fee can cost more than a higher rate with a modest fee, which is why the all-in comparison matters. The third myth is that bridging is always extortionate. For a short, well-planned bridge with a clear exit, the total can be modest relative to what it unlocks, such as a chain saved or a property made mortgageable.
The honest picture is that bridging is a short-term tool priced for speed. It costs more than a normal mortgage, and that premium, often well above a standard mortgage rate, is the price of moving fast when timing is the problem. Used with a clear exit and a tight term, it is a considered cost, not a reckless one. Used to fund a delay you could have avoided, it rarely pays.
FAQs
How much does a bridging loan cost per month in 2026?
Monthly interest on a UK bridging loan in 2026 is often somewhere around 0.55% to 1% a month, depending on the loan-to-value, the property and the strength of your exit. Because it is charged monthly, the total you pay depends on how long you hold the loan.
What fees do you pay on a bridging loan besides interest?
Expect an arrangement fee, typically around 1.5% to 2% of the loan, plus a valuation fee, legal fees for both sides, and sometimes an exit fee when you repay. A broker fee may also apply. Always ask for a full breakdown so you can compare the all-in cost.
What is the difference between gross and net bridging loans?
The gross loan is the full amount including rolled-up interest and fees, while the net loan is the cash you actually receive. If you need a set sum in hand, quote on the net figure, because fees and retained interest reduce what reaches you.
Is it cheaper to roll up or service the interest?
Servicing the interest monthly usually costs a little less overall, because the balance does not grow, but you need the income to cover the payments. Rolling up keeps your outgoings at zero during the term at a slightly higher final cost, which suits projects with no income coming in yet.
Can you repay a bridging loan early to save money?
Often yes. Because interest is charged monthly, repaying early usually stops the interest for the remaining months, though some lenders set a minimum term or charge a small redemption fee. Check whether early repayment is allowed and on what terms before you draw the loan.
Why is bridging more expensive than a normal mortgage?
Bridging is priced for speed, flexibility and short-term risk, and lenders assess the property and exit rather than years of income, so the rate sits well above a standard mortgage. The trade-off is that a bridge can complete in days and fund situations a mainstream lender would refuse.
Summary
A bridging loan in 2026 costs more than a normal mortgage because it is priced by the month for speed, with interest often around 0.55% to 1% a month, an arrangement fee of roughly 1.5% to 2%, and valuation, legal and sometimes exit fees on top. The total depends on how long you hold it, so a clear exit and a short term keep the cost down. Compare the all-in figure, not just the rate.
Updated: 23 July 2026
Written by Ben Stephenson, CeMAP-qualified Mortgage Broker.
Manor Mortgages Direct is FCA authorised, FRN 496907, has 25 years trading, is highly positively reviewed, 4.9 rated on Google, and has helped thousands secure the right mortgage. Bristol-based mortgage brokers, assisting clients nationwide.
Sources
FCA, Mortgages and Home Finance: Conduct of Business sourcebook (MCOB), handbook.fca.org.uk/handbook/MCOB, accessed 23 July 2026
Bank of England, Bank Rate and monetary policy, bankofengland.co.uk, accessed 23 July 2026
Association of Short Term Lenders, market data, theastl.org, accessed 23 July 2026
Money and Pensions Service (MoneyHelper), moneyhelper.org.uk, accessed 23 July 2026
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