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The size of regulated bridging is not what it seems – Jonathan Sealey

by: Jonathan Sealey, chief executive, Hope Capital
  • 06/06/2017
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The size of regulated bridging is not what it seems – Jonathan Sealey
Figures came out recently that suggested the number of regulated bridging loans now tops the number of unregulated loans, but it is hard to believe this is true, writes Jonathan Sealey, CEO of Hope Capital.

I am skeptical because there are a large proportion of bridging loans that go under the radar and are therefore incapable of being counted.

It absolutely makes sense that the number of regulated bridging loans is on the rise, it is just highly unlikely that they currently exceed unregulated loans.

Regulated lending on the rise

There are a number of reasons for the rise; for a start the introduction of the Mortgage Credit Directive a year ago meant that a lot of buy-to-let lending now falls under the regulated banner. It also included second charge loans, so any second charge bridging is also likely to be included.

The reason the number of regulated loans will appear to be a larger number of the whole, however, is plainly because regulated loans are reported on and counted whereas many of the unregulated loans are not.

Muddy waters

We have a pretty good idea of the shape of the bridging market because the ASTL reports figures from its members, but this is not broken down into regulated and unregulated loans. The total value of ASTL loans can be compared to the value of regulated loans but this still does not give a complete picture as there are a number of lenders that are not a part of the ASTL.  Muddying the waters still further are the number of short-term loans provided completely below the radar, often by wealthy individuals to other people they know.

There was definitely a leap in the number of regulated bridging loans following the MCD and there is a general trend towards regulation, so the amount of regulated bridging is likely to increase over the forthcoming years, but this may not rise as rapidly as may be thought in the short to medium term.

The reason is that, at the moment, the FCA actively does not want to regulate lenders or loans that it does not have to.  Unregulated lenders, such as Hope Capital, who have approached the FCA have been told that there is absolutely no point applying to be regulated if the lending being done is not of regulated loans.

This clearly demonstrates that regulated loans are not in any way superior to unregulated loans, it is just a different type of lending on a different type of property for a different end user. With Brexit negotiations taking the focus of both government and regulator, the regulation of commercially focused bridging loans looks like it will not even be considered for at least two or three years to come, as a result expect the number of regulated bridging loans to plateau until the regulation changes again.

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