Bridging and BTL 'areas of concern' for FCA

Bridging and BTL 'areas of concern' for FCA


The FSA’s new regulatory body, the Financial Conduct Authority (FCA), has dubbed bridging and buy-to-let products as ‘areas of concern’ following the introduction of new regulatory guidelines.

Speaking at this year’s London Mortgage Business Expo, the FCA’s Head of Mortgage and General Insurance Supervision Nuasicaa Delfas outlined the organisation’s concerns and plans for the industry in the coming years. 

She also identified bridging and buy-to-let as areas of the financial industry that worried the FCA.

Nausicaa said: “At last year’s MBE Sheila Nichols, our Director of Policy, mentioned that we had concerns about what we called ‘imaginative solutions’ in response to these difficult times.

“The two areas of concern then were inappropriate uses of bridging and BTL mortgaging. A year later, market conditions remain just as difficult, but both of these areas have continued to show high levels of growth year on year, in contrast with the mainstream market.

“While we have found that there’s greater demand for BTL, and therefore it’s a difficult market to write, we’re still troubled by some of the things that we hear.”

She added: “In the bridging market, we’re concerned that unregulated loans are being written on an unregulated basis in order to avoid regulatory scrutiny. One bridging firm contacted us and asked whether their customer, who was going to be living in the property concerned, should have their deal regulated. We said, ‘Yes! These should be written on a regulated basis’, and this is what the firm was doing. The broker refused to use them because they could go to other firms who didn’t do this. Unfortunately, the first firm would not tell us who those alternatives were.”

Speaking about further implications of such practices, Nausicaa went on to say: “It’s not good for the reputation of the industry and it’s certainly not good for consumers.”

“Furthermore, if you know that there are firms deliberately writing mortgages outside of regulation then I would urge you to let us know, so that we can improve standards across the bridging sector and the whole mortgage market. “

Nausicaa also outlined the problems that BTL mortgages might raise. She said: “We recently completed a review of the misuse of BTL mortgages, because of concerns that we had that BTL and Let-to-Buy products were being sold to customers who couldn’t prove affordability, in line with lenders’ more stringent lending criteria. 

“We found that although lenders understood the risks involved, their controls needed to be strengthened to guard against this. So in line with our supervisory focus group, we are aiming to improve controls and reduce the risk of fraudulent mortgage applications being written. 

“Again this is an area we will continue to monitor going forward, which remains one of the more problematic ones when regarding mortgage fraud.”


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