“In many respects, the bridging finance section of the consultation paper was more of a guide to good business practice for a lender. I am sure that most established lenders would already comply with most of the suggestions”
product is unregulated, the firm providing the advice is regulated and therefore their actions are under review and subject to censure if they are found to be inappropriate. Overall, one can see these proposals having a sizeable effect on the regulated bridging sector and, in particular, regulated advisers. For regulated lenders the suggested rule changes are much more in line with those for mainstream participants indeed most of the regulated mortgage new rules read-across to bridging. In effect the FSA is laying down a marker for the bridging sector and one would expect a much more interested future regulator, taking a much more active role in bridging activities once the final rules are passed.
Lucy Hodge, director, Vantage Finance
Bridging finance is a specialist product, and if it were to be caught up in the
MMR without concessions being made the impact could be very damaging on the sector as far as regulated transactions go. So it is important that it is recognised as a niche sector and for that reason singled out. For instance, having to assess affordability
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where the borrower will not be making payments would make the vast majority of applications unworkable given the expensive nature of bridging finance, but the FSA has recognised this and made allowances for loans which fall into its definition of a bridging loan, which is classed as being for a term of 12 months or less. We are surrounded by regulation and despite there being an argument against the regulation of certain sectors, the reality is a proportion of bridging finance currently comes under the scope of the FSA and it is important that the industry unites to ensure the regulator acknowledges the significant differences presented in short-term lending. The majority of bridging finance will still fall outside of regulation at present i.e. where below 40% of the property is occupied by the applicant or their immediate family, so the effects of the MMR currently apply to a small proportion of transactions within the bridging space, but the regulatory landscape is forever changing and evolving.
Alan Cleary,
managing director, Precise Mortgages
Bridging products are already
regulated where the security is for
the use or likely to be for the use of a borrower’s main residence so it is no surprise that the regulator has included a section on bridging in its latest consultation paper on the Mortgage Market Review. My view is that any loan that is secured on residential property should be regulated by the same authority, in this case the FSA. That includes buy-to-let, second charges and bridging loans but excludes loans made against commercial security. At present you can see the inconsistent treatment of borrowers by both lenders and intermediaries and in some instances this is causing bad outcomes. I have recently highlighted the way in which Precise Mortgages differs from the market on its interest and fee calculation methods which saves customers literally thousands of pounds but the key thing is transparency. At the moment it is not possible for a broker let alone a borrower to compare the relative competitiveness of a lender without direct comparison of the total amount repayable and even then it is not straight forward. This is one area that should be addressed for regulated and non- FSA regulated deals. Another area that needs close scrutiny is the way in which borrowers in arrears or repossession are treated as at present it is a free for all. These are just two examples where a regulator would improve the bridging market. For now I urge intermediaries to be careful when choosing a bridging lender.
Christian Faes, director, Montello Finance
The FSA’s recent consultation paper as part of their Mortgage
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