Got a property deal in hand, but short on cash?
Consider a bridging loan. In the last decade or so, these short-term loans have seen huge growth in popularity and it’s easy to see why.
The beauty of bridging finance is the ability it gives property buyers, investors and homeowners to act fast. No need to wait months for a traditional mortgage.
Quick stats:
The UK bridging loan market is big and growing.
In fact, applications increased 55% to £18.34 billion in Q1 2025.
So not only is bridging lending a huge market, it’s a growing one.
What’s covered:
- What is a Bridging Loan? & How does a Bridging Loan work?
- When are Bridging Loans A Good Idea?
- The Real Costs of Bridging Finance
- How To Find The Right Bridging Loan
What Is a Bridging Loan?
A bridging loan is a short-term loan. Designed to “bridge” the gap between when you need money and when you can get it.
A typical example is buying a new home before your old one has sold. Bridging finance lets you pay for the new property and cover the repayments while you wait for your existing property to sell.
Bridge loans are secured against property and are designed to be repaid within 12 months (some lenders will go up to 18 or 24 months). Lenders are less interested in your credit history and more interested in your exit strategy and the value of the property.
So what’s the big advantage?
Speed. Traditional mortgages can take many months to arrange and complete. Bridging loans can be arranged in as little as 38 days on average and simple, straightforward cases can be arranged in 7-14 days with certain lenders.
Some people like to shop around with a number of bridging loan lenders. So looking at a comprehensive Bridge Loan Direct guide to HSBC bridging loans can give a good indication of different lenders, their interest rates, fees and their bridging loans terms and conditions.
When are Bridging Loans A Good Idea?
Bridging loans aren’t right for everyone.
But there are a number of common situations where a bridging loan makes perfect sense.
Here are the most common scenarios for getting a bridging loan:
- Breaking a property chain: your next property is agreed but your current property has not sold
- Buying at auction: the purchase has to complete within 28 days and a bridging loan is needed to speed up mortgage approval
- Property development: the property being purchased needs refurbishment work and won’t qualify for a standard mortgage
- Business opportunities: an investment opportunity has arisen that can be funded with bridging finance
- Downsizing: you want to buy a smaller property while your current larger home is sold
The bridging market is evolving all the time and borrowers are increasingly seeing bridging finance as a solution to property problems rather than a quick fix to “save the day” in an emergency situation.
The Real Costs of Bridging Finance
- Let’s get real.
Bridging loans are expensive. The rates and fees are higher than a traditional mortgage.
But understanding the real costs is the key to making bridging finance work for you.
Expect to pay interest rates of between 0.4% and 2% per month. That works out at an APR of around 4.8% to 24%.
The good news is that rates are coming down. Interest rates fell to 0.81% in Q2 2025, down from 0.86% in Q1.
In addition to interest charges you can expect to pay the following fees:
- Arrangement fees of 1-2% of the loan amount
- Valuation fees of £500-£2,000
- Legal fees of around £1,000-£3,000
- Exit fees of around 1% of the loan when repaying
Most bridging loans are interest only or allow you to roll up the interest. Monthly repayments are low or non-existent until you are ready to repay the loan.
Remember too that you will not be penalised for repaying early. That’s a massive plus compared to many traditional mortgages.
Types of Bridging Loans
A bridging loan may sound simple but there are a number of different types to choose from.
Here are the main types of bridging loan:
First Charge Bridging Loans
This is the most common type of bridging loan. A first charge bridging loan is the primary loan secured against the property.
Features of a first charge bridging loan:
- Lower interest rates
- Higher loan-to-value ratios, typically up to 75%
- More competitive terms
Second Charge Bridging Loans
As the name implies, this loan is a second charge against the property. If you default, the first charge lender (the one with the original mortgage on the property) gets paid first.
Features of second charge bridging loans:
- Higher interest rates to reflect the increased risk to the lender
- Lower LTVs
- Stricter lending criteria
Regulated vs Unregulated
If the property in question is one where you or a family member will live in the property, then the bridging loan is regulated. The mortgage must comply with FCA regulations and come with consumer protections.
Unregulated bridging loans are for properties used for investment or commercial purposes. There are no specific regulations or consumer protections, but more freedom.
In 2024, regulated bridging accounted for 41% of all bridging transactions. It’s the fastest growing bridging sector as many homeowners turn to bridging to break a chain.
How To Find The Right Bridging Loan
Choosing the right bridging loan is more than just looking at the interest rate.
It’s about finding the right solution for your individual circumstances.
Here are the key factors to consider:
Your Exit Strategy
This is the most important thing to discuss with a bridging lender.
The lender needs to understand exactly how you are going to repay the loan. Common exit strategies include:
- Selling your existing property
- Moving onto a standard mortgage
- Selling the bridged property once refurbished
- Securing long term development finance
The clearer the exit strategy, the more competitive the rates and terms will be.
Loan to Value Ratio
Bridging lenders typically offer up to 75% LTV on first charge loans.
The lower the LTV the better. Lenders prefer lower LTVs because it means a bigger buffer of equity if things go wrong.
Other benefits include:
- Better interest rates
- Faster approvals
- More lender options
Speed
How quickly do you need the money? Some lenders prioritise speed over rate. Match the lender to your speed of completion requirements.
Bridging Loans: The Future
It’s clear that bridging lending is a sector that is continuing to expand.
In fact, total loan books are set to reach £12.2 billion by the end of 2025.
Here are some of the big trends that will drive this growth in the coming years:
Regional diversification: Investment is moving beyond London into regional and local UK housing markets as government initiatives incentivise decentralisation
Sustainability: A huge increase in demand for bridging finance to pay for EPC improvements and green renovations
Digital: A massive acceleration in approvals due to AI and other digital transformation initiatives
Brokers are bullish: 72% of brokers think the bridging market will continue to grow in 2025
It’s fair to say that bridging finance is now mainstream.
The big developers all use it, as do thousands of property investors and landlords and an increasing number of homeowners who simply need the financial flexibility.
Bridging Loans Final Thoughts
Bridging finance is ideal if you need to move fast and have a short-term property finance need.
Interest rates and fees are high. But if the situation is right, bridging loans are money well spent.
Breaking a chain, buying at auction, and funding refurbishment are just some of the common scenarios for using bridging finance.
Remember to:
- Have a clear exit strategy
- Shop around
- Compare all the costs, not just the rate
- Work with the right brokers
The bridging market is booming and lenders are competing hard to get business. 2025 could be the perfect time to see if a bridging loan can help finance your next property move.
