Why rates are monthly
Bridging loans run for months, not years, so lenders quote monthly rates. A rate of 0.75% a month equals 9% a year in simple terms. That looks expensive beside a mortgage, but you only pay for the months you use, and the comparison that matters is the total cost over your actual term. See how much a bridging loan costs.
Rates are usually fixed for the term. Some lenders offer variable rates linked to a base rate, which are worth understanding before choosing.
Retained interest
With retained interest, the lender calculates interest for an agreed number of months and deducts it from the loan at the start. You make no monthly payments. On a £400,000 gross loan at 0.8% for 12 months, £38,400 is retained, so before fees you receive £361,600.
If you repay early, most lenders refund the unused interest, subject to any minimum interest period. Retained interest is popular because it removes monthly payments, but it reduces the net advance, and because the loan to value limit usually applies to the gross loan, it can mean you need more of your own money.
Rolled-up interest
Rolled-up interest is added to the balance each month and repaid at the end. There are no monthly payments and no upfront deduction, so the net advance is higher than with retained interest at the same loan to value, although lenders still cap the projected end balance.
Because interest is usually compounded monthly, each month's interest is charged on a slightly larger balance. Over a 12-month term, compounding adds a little to the total compared with simple interest.
Serviced interest
Serviced interest is paid monthly from your own funds, like an interest-only mortgage. The lender will want evidence you can afford it, from income, rent or other resources. In return, you receive the largest net advance and the total interest is usually the lowest, because it is not compounded or retained upfront.
Many lenders allow a mix, such as retaining interest for the first few months of a refurbishment, then servicing once the property is let.
What decides your rate
- Loan to value, often in pricing tiers
- First or second charge
- Property type and condition
- The nature of any works
- Credit history and experience
- Loan size, and whether the case is regulated
Lenders also charge default interest if a loan runs past its end date unpaid, at a much higher rate. Planning a term with headroom, and reading our guide to extending a bridging loan, avoids this.
Comparing rates properly
Compare three numbers for each quote: the monthly rate, the net advance on day one and the total repayable at the end of your expected term. A slightly higher rate with serviced interest and a smaller fee can beat a lower rate with retained interest and a larger fee.
Instant Quotes shows indicative rates for lenders on our panel based on your answers. They are not offers, and the rate offered depends on the lender's valuation and checks.
For the current ranges across the panel, by product, see bridging loan and development finance rates and costs UK 2026.
Common questions
What is 0.75% a month as an annual rate?
About 9% a year in simple terms. Compounding on rolled-up interest makes the effective annual figure slightly higher.
Which interest option is cheapest?
Serviced interest usually costs least in total, but needs monthly payments. Retained and rolled-up interest avoid payments but reduce the net advance or increase the end balance.
Is retained interest refunded if I repay early?
Most lenders refund unused retained interest, subject to any minimum interest period. Check the terms before you commit.
Are bridging rates fixed?
Most bridging rates are fixed for the term, though some lenders offer variable rates linked to a base rate.
How do interest rate changes affect my bridging or development loan?
On a fixed rate, nothing changes for the term. On a variable rate linked to a base rate, the interest charged rises or falls with that rate. Rate changes can also affect your exit if you are refinancing onto a mortgage.
This guide is for general information only and should not be treated as legal, tax or financial advice. Lender requirements depend on the property and your circumstances.
