The FCA has confirmed plans to explore options for updating the twelve-month time limit for bridging loan regulation. The regulator has made a statement as part of its latest Mortgage Rule Review Feedback Statement, saying that most respondents to the consultation were in support of extending the existing term for regulated bridging loans to reflect market realities.
What the FCA plans to do
The FCA is also looking at options to update both the term limit and requirements for extending regulated bridging loans. The body will look more closely at the difficulties created by the existing term limit and consider whether any flexible term extension could cause negative impacts.
How the industry has reacted
FCA compliance consultants such as //www.adempi.co.uk/ have been watching the industry’s response to the latest news. The BDLA has said that it is in favour of the developments and has campaigned for changes for some time regarding the limitations of the 12-month term cap on regulated bridging loans.
A spokesperson explained that this type of regulated bridging finance tends to be used at high-pressure points in the property process, for example, purchases at auction or refurbishments. A single size-fits-all one-year cap currently fails to reflect the realities and challenges of the market, and the existing rules have unintentionally penalised some borrowers when they become caught up in delays. These can be down to chain breaks, material shortages, or slowing sales markets.
Industry spokespeople have agreed that the FCA’s announcement is a welcome step forward in addressing the challenges, without removing protections.