If you’re considering applying for a bridging loan, an understanding of key bridging loan regulations could prove helpful. Bridging loan regulation in the UK isn’t a particularly complex subject but should be factored into the decisions you make when choosing a lender.
The FCA took control of all aspects of bridging loan regulation in the UK as of April 2014. At which time, control of all CCA loans was transferred to the FCA. This resulted in various changes to the prior regime, affecting eligibility for certain borrowers.
What is a regulated bridging loan?
A bridging loan is formally classified as ‘regulated’ when the loan is issued against a property that is currently (or soon to be) occupied by the applicant or a close member of their family.
Both first-charge and second-charge regulated bridging loans are available, which means that the loan can either be the sole loan secured against the property (first charge) or secured ‘behind’ an existing loan on the property, such as a mortgage (second charge).
Regulation of bridging loans: two classifications
There are two primary classifications of FCA-regulated bridging loans available in the UK, which apply to loans provided for different purposes.
The first classification encompasses bridging loans regulated by the Financial Conduct Authority by reference to its MCOB Rules, known as a ‘regulated mortgage contract’. This classification applies to loans secured by way of a first charge over the applicant’s home or the home of a close family member or spouse.
The second classification of FCA-regulated bridging finance applies to loans that are secured by a second charge over the applicant’s home or the home of an immediate family member. This type of loan is regulated by the FCA by reference to its CONC Rules and is known as a ‘consumer credit loan’.
The bridging loans regulated by the FCA must be secured against property owned by the applicant, which they either currently occupy or intend to occupy in the near future. The primary condition of these regulated bridging loans is that the owner (or a close member of their family) occupies at least 40% of the property and is their primary residence.
Hence, the property must be used primarily as a place of residence rather than as a commercial property or business venture.
Accessing the best deals on the market
Here at UK Property Finance, we work exclusively with top-rated lenders from across the UK. We provide access to exclusive deals and discounts on fully regulated bridging loans for all purposes. By carrying out a whole-of-market comparison, we’ll ensure you’re provided with an unbeatable deal to suit your requirements and your budget.
If you have any questions regarding bridging loan regulation in the UK, we’d be delighted to hear from you. Contact a member of the team at UK Property Finance today for an obligation-free consultation.