But the FCA has highlighted in its CP14/20 consultation document released today that the MCD definition of bridging is slightly more narrow.
Currently the FCA states if a regulated mortgage contract has a term of 12 months or less, it is defined as a bridging loan.
The MCD definition of bridging, which will apply from 21 March 2016, states that a bridge can be either a regulated mortgage contract or an article 3 (1)(b) credit agreement of no fixed duration or repaid within 12 months.
The definition specifies that the loan must be used by the consumer as a temporary financing solution while transitioning to another financial arrangement for the immovable property.
To remain exempt from the MCD the bridging loan must meet the new definition.
The regulator does not expect any bridging loans which currently meet its definition to fall outside the scope of the MCD’s version of a bridge. But the regulator said it wants to hear from bridging lenders and advisers of any instances where this may occur so it can be reviewed.
Second charges are to be brought in line with first charge mortgage regulation, a rule which will apply in the same way to second charge bridging loans.
The FCA said this will include several tailored provisions, particularly in relation to disclosure, advising and selling standards, and responsible lending.
The consultation closes on 29 December.
Anyone wishing to take part in the consulation can complete the FCA’s form or write to Terence Denness, policy, risk and research Division, Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS.
