Bridging loans are often described as either regulated or unregulated. The difference is important because it determines which FCA rules and protections may apply to the loan.
In broad terms, regulated bridging finance is associated with residential property occupied as a home, while unregulated bridging finance is commonly used for commercial property, investment property and business purposes. However, the rules are more nuanced than simply looking at how the property will be used, so mixed-use and unusual cases should always be checked with a broker or lender.
At a glance
- Regulated bridging loans can apply where the secured property meets the requirements for FCA-regulated mortgage lending, including qualifying residential situations.
- Unregulated bridging loans are commonly used for commercial property, investment property, development and other business purposes.
- Regulated loans come with additional FCA protections and requirements.
- Unregulated does not automatically mean the lender is unauthorised — the regulatory status of the loan and the authorisation status of the firm are separate questions.
- Mixed-use or part-residential properties can be more complex, so it's important to confirm the regulatory status before proceeding.
What is a regulated bridging loan?
A regulated bridging loan is a form of short-term property finance that falls within the FCA's regulated mortgage framework. This can include qualifying bridging finance secured against a property that is, or will be, occupied as a home by the borrower or their immediate family.
Where a bridging loan is regulated, borrowers benefit from additional regulatory protections and requirements. These can include affordability assessments, prescribed information and disclosure requirements, and access to the Financial Ombudsman Service where the relevant conditions are met.
The exact rules depend on the circumstances of the loan, so a property being residential does not, by itself, make every bridging loan regulated.
What is an unregulated bridging loan?
Unregulated bridging finance is commonly used for commercial and investment purposes, including commercial property purchases, property development, investment properties and land acquisitions.
The loan itself falls outside the FCA's regulated mortgage framework. This means the borrower will not receive the same FCA-specific protections that apply to a qualifying regulated mortgage contract.
However, "unregulated" does not mean "unauthorised". A lender or broker can be FCA-authorised even when arranging or providing an unregulated loan. The important distinction is between the regulatory status of the loan and the regulatory status of the firm.
Why does the distinction matter?
The regulatory status of a bridging loan affects the rules, information and protections that apply to the borrower.
- More protection: Regulated bridging finance comes with additional FCA requirements around affordability, disclosure and the treatment of borrowers.
- More flexibility: Unregulated bridging finance can provide greater flexibility for business and investment transactions.
- Know the terms: With unregulated finance, pay close attention to fees, repayment requirements and your exit strategy.
Regulated vs unregulated: key differences
| Regulated | Unregulated | |
|---|---|---|
| Typical use | Qualifying residential situations | Commercial and investment purposes |
| FCA regulation | Yes, where criteria are met | No |
| FCA protections | Yes | No |
| Typical borrowers | Homeowners and individuals | Businesses, developers and investors |
| Examples | Residential bridging | Commercial property, development, investment property and land |
Is my bridging loan regulated or unregulated?
For most SME and commercial property transactions, such as buying an investment property, funding business premises, purchasing commercial property or securing land, bridging finance will generally be unregulated.
If the property will be occupied as a home by you or your immediate family, the regulatory position can be different. The classification can affect the information, disclosures and protections that apply to your loan, so it's important to confirm the position before proceeding.
Frequently asked questions
Are bridging loans regulated?
Some bridging loans are regulated, but not all. Regulation depends on how the loan is used and the property securing it. For example, a bridge secured against your main residence will generally be regulated, while bridging finance for commercial or investment purposes is usually unregulated.
Is a commercial bridging loan regulated by the FCA?
Generally, commercial bridging loans fall outside FCA-regulated mortgage lending. However, the regulatory status depends on the specific circumstances of the loan, borrower and property, so it should be confirmed before proceeding.
Does unregulated mean the lender isn't authorised?
No. "Unregulated" describes the loan rather than necessarily the lender or broker. A firm can be FCA-authorised while offering or arranging unregulated bridging finance. It's therefore important to distinguish between whether the loan is regulated and whether the firm is authorised.
What protections do I have with an unregulated bridging loan?
An unregulated bridging loan does not have the same FCA-specific protections that apply to a qualifying regulated mortgage contract. For example, access to the Financial Ombudsman Service is not automatically available in the same way. Borrowers should carefully review the terms, costs and exit strategy before committing to an unregulated bridge.
