How Are Bridging Loans Regulated in Britain?

Bridging loan regulations help ensure that the financial services provided by brokers and lenders alike are fair, safe and responsible. However, bridging loans regulation standards in the UK can be a little confusing. If you’re planning to apply for a bridging loan for any purpose, it’s advisable to familiarise yourself with the basics.

Back in April 2014, the Financial Conduct Authority (FCA) took complete control of bridging loans regulation in Britain . Prior to this, the CCA had handled certain types of bridging loans - responsibility being passed to the FCA as of this date. The transfer altered the regime in a number of ways, having a knock-on effect on eligibility and general application processes for many borrowers.

What Are Regulated Bridging Loans?

Quite simply, bridging finance becomes ‘regulated’ by classification when funding is provided against the value of a property that the applicant occupies or intends to occupy. Properties used as collateral that are occupied by close family members also qualify.

In bridging finance, a borrower may apply for a first charge or second charge regulated bridging loan . A first charge bridging loan applies when it is the only loan secured against the property, while second charge bridging loans are applied on top of existing loans like mortgages.

Two Classifications of Regulations of Bridging Loans

Under the new scheme, FCA regulated bridging loans are divided into two classifications, in accordance with the purpose of the loan.

The first of which is a first charge bridging loan secured against the home of the applicant or a close member of their family. Such loans are issued in accordance with the MCOB Rules of the FCA and are referred to as ‘regulated mortgage contracts’.

The second FCA regulated bridging finance covers second charge loans secured on the home of the applicant or a close member of their family. These second charge bridging loans fall under the FCA’s CONC Rules and are referred to as ‘consumer credit loans’.

In both instances, the property used to secure the loan must be currently (or soon to be) occupied by the borrower or a member of their family. In addition, FCA regulated bridging loan terms specify that the owner must occupy a minimum of 40% of the property, which must be used as their primary residence.

Properties used for business or commercial purposes therefore do not qualify under FCA regulations.

Finding the UK’s Most Competitive Bridging Loans

Finding the best deals on dynamic bridging loans for all purposes means looking further than the High Street. Along with major lenders, it’s important to consider deals from the UK’s independent bridging finance specialists.

Select a broker that works exclusively with top-rated and fully regulated lenders for the benefit of its customers. Whatever your requirements and budget, it pays to conduct a complete market comparison with an independent adviser you can trust.

Particularly if you’ve been refused help from a High Street bank, setting your sights beyond the High Street is the way to go.

Article provided by UK Property Finance.