Lender Fincorp has warned borrowers despite low monthly interest rates being advertised, a bridging loan could cost thousands of pounds more once fees are disclosed.

Nigel Alexander, director of Fincorp, described the behaviour of firms operating in the sector as ‘desperate’.

He said while the average monthly interest rate across the bridging industry was 1.2%, some lenders now offer products with advertised rates as low as 0.7%.

“We are increasingly concerned that brokers are being seduced by headline rates that are simply there for show,” he said.

“Most lenders aren’t actually agreeing deals at the rates they’re advertising but brokers and clients are being drawn in. The problem, in our view, is that some of these lenders then agree terms that are too short to be appropriate for the deal, clients default on the original terms and then they’re left facing penal rates of interest, default fees, and extension fees – often up to 2% a month, and in some cases backdated to the start of the loan.

“This is bad for consumers and should be a cause for concern.”