This guide covers auction finance costs explained — one of the key topics for UK property auction investors and buyers using specialist finance in 2026.
Monthly Interest Rate
Auction bridging finance is priced on a monthly interest rate. Monthly rates for clean residential auction finance currently range from around 0.79% per month at the lowest end to 1.5% or more for complex or adverse credit cases. Interest can be structured as retained (deducted upfront), serviced (monthly payments), or rolled-up (added to the loan balance and paid on redemption). Retained interest is the most common structure for auction bridging.
Arrangement Fee
The arrangement fee — typically between 1% and 2% of the gross loan amount — is charged by the lender for setting up the bridging loan. On a £150,000 loan, a 2% arrangement fee is £3,000. The arrangement fee is usually deducted from the loan advance on day one, so the net funds you receive are reduced by this amount.
Valuation and Legal Fees
If a physical valuation is required, the borrower typically pays the surveyor’s fee directly — usually in the range of £400–£800 for residential properties up to £500,000. Legal fees are incurred from two sources: your own solicitor and the lender’s panel solicitor. Combined solicitor costs for an auction bridging transaction typically run between £1,500 and £3,500 for a straightforward residential case.
Total Cost Illustration
Example: £150,000 auction bridging loan, held for six months. Monthly rate 0.9% retained: £8,100 interest. Arrangement fee 1.5%: £2,250. Valuation: AVM, no fee. Legal fees: £2,500. Broker fee: £750. Total cost of borrowing: £13,600. This is the number that must appear in your deal analysis before you bid.
Case Studies
Case Study: Clean Residential, Low Rate, Six Months, Bristol
Denise purchased a two-bedroom flat in Bristol for £165,000, taking a bridging loan of £115,500 at 70% LTV. Monthly rate: 0.85% retained for six months (£5,890 interest). Arrangement fee: 1.5% (£1,733). Valuation: AVM, no fee. Legal fees: £2,100. Broker fee: £750. Total cost of borrowing: £10,473. Denise included this figure in her deal analysis before bidding and confirmed that the deal still generated her target profit.
Case Study: Adverse Credit Case, Higher Rate, Nine Months
Case Study: Commercial Property, Higher Complexity Costs
FAQs
Most auction bridging loans are fixed-rate for the term of the loan. For the certainty needed in an auction context, fixed-rate is generally preferable.
To an extent. Rates and fees are not entirely fixed in the specialist bridging market and brokers with strong lender relationships can sometimes access preferential pricing, particularly for larger loans or returning clients.
Retained interest is deducted from the loan advance at the start — you receive less money upfront but know exactly what you will pay. Rolled-up interest accrues on the outstanding balance and is paid on redemption, and will cost more than retained interest for the same term.
Most specialist bridging lenders do not charge the arrangement fee until the loan completes. However, some charge a commitment or application fee upfront which may not be refunded if the loan does not proceed. Always check the fee structure and refund policy before committing.
No. SDLT is calculated on the purchase price of the property, not on the loan amount or total costs. Finance costs are deductible for capital gains tax purposes when you sell, as they form part of the acquisition and holding costs.
