Yes, the bridging loans industry is regulated by the Financial Conduct Authority who took over the responsibility of consumer credit from the Office of Fair Trading in 2014. However, depending on type of loan, some finance will fall under regulated or non-regulated, which we explain below:
What is Regulated?
Regulated activity can be secured by first charge against a property, which is usually where the main borrower lives or will be living with their family. This loan is 1st charge because it is the first priority when it comes to making mortgage repayments, so it is likely to be their primary residence or where they own at least 40% of more of this property. This is pretty much a standard mortgage, which is also known as a regulated mortgage contract.
A second charge loan means that it will be the second priority or next in line when it comes to making monthly mortgage repayments. Borrowers typically use a second charge to raise finance, whether it is for personal reasons or for investment purposes. This does not fall under fall under the FCA’s Credit Consumer rules as this changed in March 2016 and now falls under their mortgage regime (MCOB).
Examples of regulated lenders include West One Loans, Precise Mortgages and Shawbrook.
When is it Not Regulated?
There are several lenders that offer non-regulated bridging and this is typically for loans secured against investment properties, buy to let properties, business purposes and people with limited companies. This also includes mixed use properties such as shops with flats above or anything that does not meet the FCA’s definition of a residential property.
The idea is that non-regulated lenders will not offer a secured loan on the borrower’s main residence or where they live. So you can certainly apply for a second charge with a non-regulated lender, but it certainly will not be secured on your existing home.
Examples of non-regulated lenders include MT Finance and Regentsmead.
(Source: The FT)
Are Regulated Lenders Better?
Not necessarily. There are several responsible regulated and non-regulated bridging lenders so there is no need to favour one over the other. Simply because the lender is not regulated does not mean that they won’t fulfil all their duties as a responsible lender. This includes having a consumer credit license, carrying out thorough checks and following the FCA guidelines of responsible lending and treating customers fairly.
What Are The Differences in the Product?
Other than the fact that non-regulated companies will not offer a second mortgage on someone’s residential property, the other main differences are in price. Lenders that are not regulated may be slightly more expensive than regulated providers.
There is also the requirement of the Financial Conduct Authority to carry out credit checks as part of the application process. This will look at the customer’s credit history and how well they have paid other types of loans and credit in the past and what debt they have outstanding to make an informed loan decision. However, non-status lenders will not necessarily need to run credit checking during the application process and can instead focus their decision on the individual, their track record and potential of their investment opportunity.
How Our Site Works
We are a licensed intermediary operating in the UK and we have partnered with Brightstar Financial who are one of the most successful brokers in the bridging finance sector. Your application will be put in front of a combination of regulated or non-regulated companies with the intention to find the best product for you. We only work with reputable companies who we trust, so you can be rest assured that your application will be safe hands and you can access the finance you need. When providing you with a quote, we will take a number of factors into consideration to suit your needs including the fees charged by our partner lenders, the criteria and speed of funds.
An application on our website simply involves entering your name and contact details and this will be sent to an advisor at Brightstar who will be in touch immediately to find out more information from you. Our site is secure and hosted on an https secure server so your details will be held confidentially and only passed onto Brightstar and no other third parties.