Why are we all so hung up on regulation?


Regulation, regulation, regulation. We hear about it time and again in the bridging sector. To be honest, it’s getting a bit boring. Why? Because the point is moot in my opinion. Bridging itself is no more in need of regulation than buy-to-let. The vast majority of bridging – or short-term finance more accurately - is a commercial decision, albeit in the residential property market.

These are experienced landlords and property developers looking for reliable and fast finance to fund commercial projects. Regulation is only helpful when there is a consumer to protect – and 95% of bridging is business.

So why are we all so hung up on regulation?

Perhaps the most obvious reason is that the regulator – formerly the Financial Services Authority but now the Financial Conduct Authority – waded into the debate on the bridging market when it published its second Mortgage Market Review consultation paper in late 2011.

It raised concerns anecdotally, saying it had heard of consumers being urged to take short-term bridging in situations they should have been taking a mainstream residential (and therefore regulated) mortgage. Because of the credit crunch and the banking crisis borrowers couldn’t find a deal as lenders, as we know all too well, have been far tighter on their criteria than pre-2008.

But while I have full respect for the FCA taking a stand against this type of customer abuse I think it is fair to say that it is a tiny minority of the bridging market that succumbs to this type of lending – if any at all.

That’s not to say the bridging market and all lenders are whiter than white. There has been much evidence published in various trade magazines showing that some lenders are tying their borrowers up in opaque paperwork, others are charging exorbitant rates of interest, penal rates of interest are being applied, backdated to the start of a loan if it fails to repay on time and there are those still charging sky high fees and then pulling out of doing the loan last minute.