We recently set the ball in motion to become regulated for mortgage lending and administrating.
We are already authorised by the Financial Services Authority to run an unregulated collective investment scheme, which is used to fund non-regulated loans.
This enables us to pool private investor funds at source in order to lend but without FSA lending authorisation we can’t fund regulated loans.
We have concluded that with more lenders entering the bridging sector, it would be preferable to compete across the whole market rather than limiting ourselves to the crowded non-regulated area.
Given the quality of regulated lending, we believe this will provide an attractive opportunity for our investors.
Second charges on homes will fall under FSA regulation in due course but it is by no means certain that the entire bridging sector will be forced to become regulated.
In the absence of mainstream finance an increasing amount of bridging is being funded by private finance a situation which the government and regulatory bodies should applaud, given their preference for shrinking the public sector and encouraging private initiatives.
If increased regulation was to lead to a large drop in the overall internal rate of return for investors currently funding this sector, it is likely they would seek better returns elsewhere, thus exacerbating funding problems.