Robert Sinclair, director of the Association of Mortgage Intermediaries, revealed at this year’s Mortgage Business Expo that buy-to-let and bridging will be subject to new regulations under the European Commission’s mortgage directive.
Since then the industry has been assessing the impact of this.
Will it make the market more transparent and competitive, or will it stifle growth in a flourishing area of commercial finance? The final directive is not yet confirmed but no doubt it will be costly to implement.
At issue is the definition of residential property. In its broadest sense it covers buy-to-let, which is often initially funded by bridging finance. The client for this transaction is a property investor or developer, but is it this consumer that the directive aims to protect?
In the current climate, bridging on investment and commercial properties has experienced rapid growth, which increased regulation will certainly restrict.
Issues remain as there are discrepancies between what the Financial Services Authority may require and what the EU directive may deliver. As a result, we could see the appetite for bridging diminish as regulatory pressures impede property transactions.
We need to offer greater protection to customers and improved regulation will bring this. But we will have to wait and see what the final proposal will deliver and the impact it will have on a constrained property market.