Regulated Bridging Loan

A regulated bridging loan is a short term loan that falls under the supervision of the Financial Conduct Authority. The regulation applies when the property used as security is, or will be, occupied by the borrower or an immediate family member as their residence. This guide explains what regulation means in practice, how it protects you, when it applies, and how regulated bridging differs from unregulated facilities.

What Makes a Bridging Loan Regulated?

The defining factor is property occupation. If the property being used as security for the loan is currently your home, or will become your home, or is occupied by a close family member, the bridging loan must be regulated by the FCA. This applies regardless of the purpose of the loan.

For example, if you are using a bridging loan to buy a new home before selling your current one, and the current home is the security, that loan is regulated. Similarly, if you are raising funds against the home where your parent lives, that falls under regulation.

If the security property is a buy to let investment, a commercial building, or any property that neither you nor a close family member will live in, the loan is unregulated. Unregulated bridging loans are not subject to FCA rules and offer fewer consumer protections.

Why Regulation Matters

FCA regulation exists to protect consumers. When a bridging loan is regulated, the lender must follow specific rules designed to ensure fair treatment. These protections include the following.

Affordability assessment. The lender must assess whether you can afford the loan, including a credible exit strategy. This goes beyond simply looking at the property value; the lender must consider your overall financial position.

Clear disclosure. All fees, charges, and interest rates must be set out transparently before you commit. There should be no hidden costs. The lender is required to provide documentation that explains the total cost of the loan in plain language.

Cooling off period. You have the right to a reflection period after receiving the loan offer, giving you time to consider the terms without pressure.

Complaint rights. If something goes wrong, you can complain to the lender and, if the issue is not resolved, escalate your complaint to the Financial Ombudsman Service. The FOS can investigate and make binding decisions against the lender. This is a significant protection that does not exist with unregulated loans.

Financial Services Compensation Scheme. Regulated bridging loans fall within the scope of the FSCS. If the lender were to fail, you would have recourse to compensation under the scheme.

Regulated vs Unregulated Bridging Loans

The practical differences between regulated and unregulated bridging are worth understanding, because they affect the process, the timeline, and the cost.

Consumer protection. Regulated loans come with full FCA protections, including access to the Financial Ombudsman and the FSCS. Unregulated loans have none of these safeguards. If you have a dispute with an unregulated lender, your options are limited to the lender’s own complaints process or the courts.

Affordability checks. Regulated lenders must carry out a thorough affordability assessment. Unregulated lenders focus primarily on the security value and the exit strategy. This means unregulated loans can sometimes be approved more quickly, but with less protection for the borrower.

Speed. Regulated bridging loans can still complete quickly, often within 2 to 4 weeks. However, the additional compliance checks required by FCA rules can add a few days compared to unregulated facilities, which can sometimes complete in under a week.

Lender panel. Not all bridging lenders are authorised to offer regulated products. Offering regulated loans requires the lender to hold specific FCA permissions and maintain compliance systems. This means the panel of lenders available for regulated bridging is smaller than for unregulated deals. Working with a broker who has access to the full regulated market is important for getting the best terms.

Loan term. Regulated bridging loans are typically available for terms of 1 to 12 months. Some lenders will extend to 18 months in specific circumstances. Unregulated loans can run for longer terms, sometimes up to 36 months.

Interest rates. Rates on regulated bridging loans currently start from around 0.55% to 0.75% per month for first charge facilities at low LTV. Unregulated rates can be slightly lower in some cases because the compliance overhead is reduced, but the difference is not always significant. The rate you are offered depends on LTV, the property, your credit profile, and the lender.

When Does Regulated Bridging Apply?

Understanding exactly when regulation applies helps you know what to expect from the process. Regulated bridging is required in the following situations.

Chain break. You are buying a new home but your current home has not yet sold. A regulated bridge secured against your current home can fund the purchase, and you repay the loan when the sale completes. This is one of the most common uses of regulated bridging.

Downsizing. You want to move to a smaller property quickly but your existing home is still on the market. A regulated bridge lets you proceed with the purchase without waiting for the sale.

Renovation before moving in. You have bought a property that needs work before it is habitable. A regulated bridging loan can fund the purchase and the renovation if you intend to live there once the work is complete.

Probate and inheritance. If you have inherited a property that a family member occupies, and you need to raise funds against it, the loan will be regulated.

Divorce and separation. If one party needs to buy out the other’s share of the family home quickly, a regulated bridge can provide the funds while longer term mortgage arrangements are put in place.

Which Lenders Offer Regulated Bridging?

The regulated bridging market includes a mix of specialist lenders and some larger institutions. Well known names in this space include Together, West One, MT Finance, United Trust Bank, Precise Mortgages, Shawbrook, and LendInvest, among others. Each lender has its own criteria, maximum LTV, and rate structure.

Because the pool of regulated lenders is smaller than the unregulated market, using a whole of market broker ensures you are not limited to a single lender’s criteria. A broker can match your circumstances to the right lender and negotiate on your behalf.

Costs of a Regulated Bridging Loan

The cost structure for regulated bridging loans is similar to unregulated facilities, with a few differences driven by the compliance requirements.

Interest. Charged monthly, typically from 0.55% to 1.0% per month depending on LTV and the lender. Interest can be serviced monthly, retained from the advance, or rolled up.

Arrangement fee. Usually 1% to 2% of the gross loan amount.

Valuation fee. Ranges from £300 to over £1,000 depending on the property value.

Legal fees. Both borrower and lender legal costs apply. Combined, these typically range from £1,500 to £3,000.

Broker fee. Typically 1% of the loan amount if you use an intermediary.

No early repayment charges. Many regulated bridging lenders do not charge penalties for early repayment. This is worth confirming at the outset, as it means you can repay the loan as soon as your exit strategy completes without additional cost.

The Application Process

Applying for a regulated bridging loan follows a structured process designed to meet FCA requirements while still delivering the speed that bridging finance is known for.

Initial assessment. Your broker gathers details about the property, the amount needed, your exit strategy, and your financial circumstances. This allows them to identify suitable lenders and provide an indication of terms.

Decision in principle. The lender reviews the headline details and issues an indicative offer, usually within 24 to 48 hours.

Valuation. A surveyor inspects and values the security property. The lender uses this to confirm the maximum loan amount.

Underwriting. The lender carries out full underwriting, including the FCA mandated affordability assessment. This stage confirms the offer and sets the final terms.

Legal work. Solicitors carry out property searches and prepare the legal documentation. The lender’s legal team reviews the title and confirms everything is in order.

Completion. Once all conditions are satisfied, funds are released. In a well managed process, completion can happen within 2 to 4 weeks of the initial application.

Common Questions

Can a limited company take a regulated bridging loan? Yes, but only if the property will be occupied by a director or a family member of a director. The occupation, not the borrower entity, determines whether the loan is regulated.

Is regulated bridging available on second charge? Yes. If the property is owner occupied and you want to raise a second charge bridging loan against it, that loan is regulated. The same FCA protections apply.

Can I use regulated bridging for a buy to let? No. If the property is an investment and will not be occupied by you or a family member, the loan is unregulated. Regulation applies strictly based on occupation.

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Knox Mortgages is a trading style of Fort Advice Bureau which is regulated and authorised by the FCA to conduct Mortgage and Protection business, FRN: 972730