Don't be seduced by the headline rate

Headline grabbing rates often attract the most attention, but solutions with such low rates may not always be best suited for a client’s needs. Besides the potential for hidden fees, there are other areas that a property professional should consider when sourcing a solution.


EY recently published a report which highlighted trends within the bridging market. The report collated responses from c.50 UK bridging finance lenders and brokers with a combined bridging loan book size of £4.8b and annual brokerage volumes in excess of £6bn.

One of the survey findings pointed to greater competition within the short-term lending arena and a downward pressure on interest rates.

As the short-term lending industry has matured since the financial crisis in 2008/9, what was ostensibly a non-status product has become every bit a status loan. In the past few years, the clients I speak to feel many short-term lenders’ have adopted the same criteria and processes as high street banks. The adage of “the cheapest money is the most difficult to get” remains as true today as it ever was.

Whist many believe a cheaper product is a route to higher market share, many borrowers will forsake a cheaper rate for certainty of funds. Everyone wants a quick “no” more so than the uncertainty around a drawn out “yes”.

A thorough broker will always try and source the deal that best suits their client’s needs, but it’s hardly unsurprising that their clients are initially attracted to what would appear to be the cheapest headline rate.

As lockdown restrictions are eased, we have been able to demonstrate that whilst our products appear to be of a higher price premium based on the headline rate, they are indeed cheaper once all fees and costs are factored in. In explaining the differentiation in lenders’ products, brokers and borrowers alike need to look at the total of what they pay, and not assume one lender is cheaper than another based purely on the headline rate.

Brokers should also be reassured on how lenders are funded. Property professionals need to know that their lender of choice will be able to support them through to the end of their development. At Arbuthnot Specialist Finance Limited (ASFL), we have the stability and liquidity of our long-established parent bank that will ensure support through the difficult times that some feel lay ahead for the UK economy.


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The Arbuthnot Specialist Finance team provides real estate finance solutions for transactional, refurbishment and development projects in England, Scotland and Wales


Registered in England and Wales No. 11103603. Registered Address: Arbuthnot House, 7 Wilson Street, London, EC2M 2SN. Arbuthnot Specialist Finance Limited is not authorised and regulated by the Financial Conduct Authority.


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