However, according to recent headlines, the tables have turned. The level of regulated bridging is on the rise and is outperforming regulated lending, with regulated loan transactions increasing from 37.3% in Q4 2016 to 50.7% in Q1 of this year.
Following the government’s series of fiscal and regulatory changes to buy-to-let, this isn’t that surprising, as consumer buy-to-let is now classified as a regulated sale. As well as the cross over between bridging and buy-to-let, cheap rates and an increase in awareness of bridging finance among brokers and borrowers have contributed to this. However, there are a number of non-regulated lenders who are looking to become regulated, although this is only possible if they carry out regulated business.
This shift towards regulated lending has had an impact on the lending landscape and more specifically on the average time it takes to complete a bridging loan. In fact, it has reached 50 days which is noticeably different from Q1 in 2015 when the average time to complete was 34 days. However, at Hope Capital we have not seen an increase in completion time, suggesting that this is not increasing across the board.
As I’ve mentioned before, regulation isn’t the be all and end all of the market. It should of course be in place for certain lending but if a lender acts openly, ethically and in the best interest of the borrower, in some ways it becomes irrelevant. This is why many industry commentators have argued that properly conducted unregulated bridging should remain unregulated. On the other hand, the regulator should intervene in unregulated activities in the market if they are illegal or fraudulent and it’s vital that measures are in place for those lenders who intentionally cause consumer detriment.
Although regulation is always in the forefront of lenders’ minds, I cannot see the FCA introducing total regulation to the sector in the near term. We don’t want or require blanket regulation. Further regulation is likely in the longer term in order to raise standards, which has to be a good thing for borrowers. It is therefore likely that regulation will slowly creep in over the next few years and this could prove to be beneficial to every refutable firm in the bridging sector to ensure unethical practices are quickly eradicated.
