Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Bridging Finance: Separating Myth from Reality
Moneymagpie Team
25th Jun 2026
Bridging finance occupies a powerful yet frequently misunderstood corner of the lending market. Long burdened by historical associations with predatory lending, high interest rates, and unexpected default fees, the sector is currently undergoing a critical period of self-reflection. To separate the persistent myths from the modern realities of the industry, we sat down with Holly Andrews, Director and former Managing Director of KIS Finance.
With nearly two decades of deep-rooted financial experience, spanning secured loan underwriting, mortgage advisory, and corporate compliance, Holly offers a uniquely balanced perspective on the market. Having taken the helm of KIS Finance in 2015 before stepping into her current directorial role in 2025, she knows the industry inside and out, and saw how some bad actors can distort the image of the whole industry.
Many people still associate “bridging loans” with predatory practices and high-risk traps. From your perspective, how much of this bad reputation is earned versus how much is a misunderstanding of what the product is actually for?
The bad reputation is, in my view, mostly earned, but partly a misunderstanding of the product. Bridging is designed to be short-term finance with a clear exit, such as a sale, refinance or completion of works. It becomes dangerous when used as a substitute for long-term borrowing, especially where there is no realistic repayment plan.
This happened more after the credit crunch, when self-cert mortgages disappeared and some borrowers used bridging because they could not evidence income or afford monthly payments. Historically, bank bridging was often a ‘residential timing product’ for chain breaks or buying before selling. It was not expensive interest rate or costs wise, it was actually low cost money, but because the sums were large, the cost felt high.
After banks withdrew from specialist finance, some lenders filled the gap with higher rates, default charges, renewal fees and, in unregulated cases, fast enforcement through LPA receivers.
So yes, some criticism is justified. But bridging itself is not predatory. Used correctly, it is valuable. A bridge is supposed to get you from one side to the other; it is not somewhere you are meant to live.
In the recent articles, you have shown the difference between regulated and unregulated bridging loans. Do you believe this distinction is sufficiently understood by borrowers, or is it a primary area where “bad actors” exploit confusion?
It is not sufficiently understood by borrowers, and sometimes not fully understood within the industry either. Borrowers often underestimate regulated protection and considerably overestimate what protection they have available with an unregulated loan.
A regulated lender can offer both regulated and unregulated loans. Some lenders may use one regulated company for regulated bridging loans and another separate unregulated company within their group, often with the same trading style, for unregulated loans. Borrowers may therefore assume that they are dealing with one company that is regulated, when in fact they are not.
This is where bad actors exploit confusion. We regularly speak to borrowers asking for an unregulated loan as if it is automatically better, usually because they have been told by an unregulated broker or lender it will be quicker, easier or more flexible. If they understood the difference, most would insist on a regulated loan.
Unregulated bridging is not inherently wrong, many commercial and investment cases are legitimately unregulated. But borrowers must understand what they are giving up in the way of regulatory protection, complaint routes and controls on unacceptable terms.
Can you describe the most common “hidden” costs or fee structures that you see being used to artificially lower the perceived interest rate of a loan?
The biggest issue is how interest is calculated. Borrowers focus on the headline monthly rate, but two loans with the same rate can have very different repayment figures.
With rolled-up interest, interest is added monthly and charged on the increasing balance. This is used for regulated bridging and is generally cheaper than retained interest. With retained interest, interest is effectively calculated against the gross facility for the agreed term. This can make the headline rate look attractive, but is more expensive, particularly when the borrower takes a longer term and then repays early.
Borrowers should also check whether the rate is fixed, linked to a base rate, temporary, and whether exit fees apply.
Extension and renewal fees are another major issue. Many bridging loans go over term due to delays with sales, refinancing, legal work, planning or building. Some lenders charge reasonable extension fees, perhaps 1% or 2%, but others charge 5% or more. Because borrowers don’t expect to wind up going over term, when typically 1 in 4 do, these costs are hidden in plain sight.
What is the best way for people to detect those hidden costs and address them with the lender?
Ask for the actual loan agreement, not just the quote or terms illustrations. The illustration may show the loan amount, term, rate and basic fees, but the loan agreement contains the real contractual position.
Borrowers should carefully read the sections covering default interest, extension fees, renewal fees, exit fees, early repayment costs, enforcement costs and lender rights if the loan is not repaid on time. If anything is unclear, ask the broker, lender and your solicitor to explain it. If anything is unacceptable, look for a better lender, or ask whether it can be amended, or removed, or even capped.
If the lender will not explain the charges, or the agreement contains high extension fees, excessive default charges or unclear enforcement costs, treat it as a warning sign.
Is the current regulatory boundary actually helping bad actors by creating a “safe haven” where they can operate with less scrutiny?
I would not say the boundary is designed to help bad actors, but it can create opportunities for them. There are many good unregulated lenders and brokers, and many legitimate commercial loans should remain unregulated. But the unregulated market is easier to enter and operates with less scrutiny, fewer conduct requirements and fewer complaint routes.
A broker or lender that loses, avoids or surrenders regulated status may still operate in unregulated finance. That is concerning, particularly where borrowers assume the same protections apply.
The answer is not to regulate every commercial loan, as that could reduce useful flexibility. But there should be much clearer disclosure, and consequences for firms found exploiting their customers.
What is one specific, actionable regulatory change that would close the gap between regulated and unregulated outcomes for the average borrower?
I would move the boundary so it is based less on the stated purpose of the loan and more on the sophistication of the borrower.
If finance is for business or investment, the assumption is often that the borrower does not need consumer-style protection. That may be true for large companies with accountants, lawyers and finance teams. It is however often not true for individuals, small businesses, small builders, first-time developers, small SPVs or people buying investment property for retirement planning.
I would introduce a “small borrower” or “non-sophisticated borrower” test. Individuals and small owner-managed businesses should receive regulated-style protections unless they clearly meet criteria for being sophisticated commercial borrowers. Those protections should include clear fee disclosure, fair treatment, limits on excessive default and extension charges, proper risk explanation, assessment of the exit route and access to a meaningful complaint process.
If you were advising a client to protect themselves, what is the one “must-have” document or piece of transparency they should demand before signing anything?
The must-have document is the actual loan agreement, together with a clear written breakdown showing what the borrower will owe if the loan is repaid on time, repaid early, or goes over term.
The borrower must understand the headline cost, but also the worst-case cost if the exit is delayed.
We often hear that a few “bad apples” spoil the industry. Is that sentiment just a convenient excuse for established lenders to avoid taking collective responsibility for cleaning up the sector?
There is some truth in the “bad apples” argument, but it can also become an excuse to avoid looking too closely at the market.
There are many good lenders, brokers and packagers. But when bad practice occurs, borrowers can lose property, savings, pension money and sometimes face personal debt or bankruptcy.
Bad outcomes are often hidden. Some brokers arrange only a few bridging loans a year and may never see what happens after completion. When a lender charges default fees, appoints receivers or enforces aggressively, they do not usually broadcast this, and even the introducing broker is usually kept in the dark.
If the same issues keep appearing around particular firms or lending models, this should be noted and acted upon, not ignored. The market has a responsibility for which firms it supports. Good lenders, brokers, funders and trade bodies should be willing to stop enabling poor practice.
What role do brokers play here? Are companies like KIS Finance acting as the first line of defence for the consumer, or are they often too incentivized by commissions to challenge a lender’s bad practices?
Good brokers should be the first line of defence. They should assess suitability, test the exit route, compare lenders, explain risks and steer clients away from poor terms or lenders with bad practices. At KIS Finance, we see that as a core part of our role.
I do not think commission is usually the main issue, as lender commission structures are often broadly similar. The bigger incentive is completion. Brokers mainly earn when a deal completes, so there can be a pull towards lenders who are fast, easy or likely to say yes.
Packagers also matter. Many are excellent, but some packagers have preferred arrangements with certain lenders, so the final recommendation may not be as independent as expected. A good broker must be experienced, independent and prepared to say no to a lender.
How can a consumer distinguish between a broker who is genuinely on their side and one who is merely a “lead generator” for the highest-paying lender?
Look for specialist bridging experience. Bridging is different from a standard mortgage. The risks, timescales, exit strategy and lender conduct are all important factors.
A good broker should be transparent, comfortable explaining downsides, and able to justify why a lender has been recommended. Reviews can help, especially where they show communication and problem-solving.
Regulatory status matters too. There are good regulated and unregulated brokers, but a regulated broker offers more protection. An unregulated broker can only arrange unregulated bridging loans, so the borrower may not see all possible options.
Borrowers should ask: How many lenders do you work with? Why this lender? Have you compared alternatives? Are there lenders you avoid? What happens if the loan goes over term? What are the extension, default and exit fees? A genuine broker will answer clearly.
If we fast-forward five years, what does a “clean” bridging loan industry look like, and what is the biggest obstacle standing in the way of that transformation today?
A clean industry would be one where bridging is recognised as a useful, flexible, short-term funding solution, without excessive costs, unfair terms or penalties designed to profit from borrower distress.
Good lenders would thrive because they are transparent, fair and responsible. They would still make profit, but from good lending, not from default. Small borrowers, such as individuals, small developers, small businesses and buy-to-let investors, would have appropriate protection, while sophisticated commercial borrowers could still access flexible unregulated finance.
Borrowers would be able to compare true costs, including interest method, exit fees, default charges and extension costs, and understand what happens if everything goes to plan as well as what happens if the exit is delayed.
The biggest obstacle is profit. Some firms make a great deal from high default interest, excessive extension fees and aggressive enforcement. They have little incentive to change voluntarily. A cleaner market needs regulatory reform, transparency, borrower education and brokers willing to stop supporting poor conduct.
The icing on the cake will be if lenders who have excessively profited by their deliberate bad practices and taking advantage, have to compensate and make good the customers who have lost out.
Is there anything else you would like to add or mention for the purpose of this interview?
Yes. Bridging finance is a useful and important part of the lending market. There are many good lenders, brokers and professionals who care about doing things properly.
Poor practice harms borrowers and damages a sector that can provide genuine value. The aim should be to raise standards, improve transparency, protect borrowers who need protection and ensure good firms thrive.
With the right standards, bridging can keep its speed and flexibility while removing the practices that cause harm.
Have you ever experienced any bad practices from a bridgin loan lender? KIS Finance has launched a dedicated email address you can reach out to, tell your story and get help from the KIS Finance team. Send your story to [email protected], or fill in a form on their website.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
Subscribe
Login
0 Comments
