By Rachel Wait

Borrowers are being warned about the problems of using costly short-term bridging loans if they are struggling to remortgage.

The Financial Services Authority (FSA) recently highlighted its concerns that mortgage brokers are misusing these loans and they may not be in consumers' best interests.

Bridging loans can help homeowners with temporary cash problems as if, for example, you need to complete on the purchase of a new property before you've sold your home, you can take out a loan to bridge the gap.

Brokers can earn double or treble the amount of commission they might receive on a traditional mortgage. But the worry is that some brokers are recommending these mortgages to borrowers who can't remortgage due to having insufficient equity in their homes or who have missed several mortgage payments.

When the bridging loan comes to an end, should the borrower not qualify for a traditional mortgage, they will find themselves stuck on an extremely high interest rate.

Costs can quickly add up because on top of these high rates – usually around 1% to 1.5% per month - bridging loans also have high arrangement fees and exit fees, both of which are around 1% to 2% of the loan amount.

It may be possible to arrange for the term of a bridging loan to be extended or even remortgage with a different bridging lender, but this is likely to mean you'll have to fork out for another arrangement fee.

Brokers are being told they should therefore only recommend bridging loans to borrowers who can definitely qualify for a mortgage later on.

"Bridging loans have clear consumer benefits in unlocking property chains but they are likely to be far less appropriate option for those borrowers in payment difficulties who may simply be putting off the inevitable by taking out a bridging loan," says Sheila Nicoll, director of conduct policy at the FSA.