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Bridging Loans
A clear guide to what makes a bridging loan regulated, how it protects you, and when you need one.
A regulated bridging loan is a short-term secured loan that falls under the oversight of the Financial Conduct Authority (FCA). The key factor that determines whether a bridging loan is regulated is straightforward: if the property used as security is, or will be, occupied by the borrower or a close family member as their residence, the loan is classified as regulated.
This classification places the loan under the same regulatory framework that governs residential mortgages, known as the Mortgage Conduct of Business (MCOB) rules. Lenders offering regulated bridging loans must carry out affordability assessments, provide clear documentation of all costs and terms, and follow strict conduct standards throughout the loan process.
Bridging loans are designed to cover a temporary funding gap, typically lasting between 1 and 18 months. They are most commonly used when a borrower needs to complete a property purchase before the sale of an existing property has gone through. The loan covers the period between buying and selling.
Whether a bridging loan is regulated has nothing to do with the lender or the amount borrowed. The same lender could offer a regulated loan in one case and an unregulated loan in another, depending entirely on who will occupy the property being used as security. For a broader overview of how bridging finance works, see our complete bridging loans guide.
The core difference between regulated and unregulated bridging loans comes down to one question: will the borrower or a family member live in the property being used as security?
If the answer is yes, the loan is regulated by the FCA under its MCOB rules. If the property is purely for investment, commercial use, or development with no residential occupation by the borrower, the loan is unregulated.
This distinction matters because regulation brings specific borrower protections. With a regulated bridging loan, the lender must carry out a formal affordability assessment before approving the loan, provide a clear breakdown of all fees and interest charges, and follow strict rules around how arrears and repossessions are handled.
If something goes wrong with a regulated loan, borrowers can raise a complaint through the Financial Ombudsman Service (FOS). In certain circumstances, the Financial Services Compensation Scheme (FSCS) may also provide a safety net if the lending firm fails.
It is important to understand that "unregulated" does not mean unsafe or unscrupulous. Unregulated bridging loans serve a different market entirely. They are used for buy-to-let investments, commercial property purchases, land acquisition, and property development where the borrower will not live in the secured property. Many experienced property investors choose unregulated bridging because it typically offers faster completion times and fewer procedural requirements.
Both types of loan can be arranged through specialist brokers, and both carry similar structures in terms of interest, fees, and repayment. The regulatory status is determined by the loan's purpose and the property's use, not its quality or the reliability of the lender.
Working out whether your bridging loan falls under FCA regulation is simpler than it might appear. The key factor is the relationship between the borrower and the property being used as security. Run through the following questions to find out where your situation falls.
If you or a close family member will occupy the property at any point during the loan term, whether as a main residence or otherwise, the bridging loan is almost certainly regulated.
If the property is your current home, or will become your main residence once the purchase completes, the loan falls under FCA regulation.
If you are taking a second charge bridging loan secured against your existing home, even if the borrowed funds are being used for another purpose, this is typically regulated because the security is your residence.
If the property is purely for buy-to-let, commercial use, or development for resale with no intention for the borrower or family to live there, the loan is likely unregulated.
When a bridging loan is regulated, several protections apply automatically. You gain access to the Financial Ombudsman Service if you have a complaint about how the loan was sold or managed. The lender must carry out a proper affordability check before approval, acting as a safeguard against borrowing more than you can realistically repay. All costs, including interest, arrangement fees, and exit fees, must be disclosed clearly and upfront. In some situations, FSCS protection may apply if the regulated lender becomes insolvent. These protections are requirements set by the FCA's Mortgage Conduct of Business rules, regardless of which lender you choose.
Regulated bridging loan rates are typically quoted as a monthly percentage rather than an annual rate, reflecting the short-term nature of the product. Typical monthly interest rates for regulated bridging loans currently range from around 0.55% to 1.1% per month, depending on the loan-to-value ratio, the borrower's circumstances, and the specific lender's criteria.
Arrangement fees, charged by the lender to set up the loan, usually fall between 1% and 2% of the gross loan amount. Some lenders also charge an exit fee, typically around 1% of the loan, although many regulated bridging products now waive exit fees as a competitive feature. Valuation fees, legal costs, and broker fees are additional costs that sit outside the headline rate and should be factored into your total borrowing cost.
The maximum loan-to-value (LTV) ratio for most regulated bridging loans is 75%, though some specialist lenders may offer up to 80% in certain circumstances. Higher LTV loans generally attract higher interest rates to reflect the increased risk to the lender.
Loan terms typically range from 1 to 18 months, with 12 months being the most common maximum for regulated products. Interest is usually "rolled up" and added to the loan balance rather than paid monthly, meaning borrowers repay all interest when the loan is redeemed.
Regulated bridging loans may carry a modest rate premium compared to equivalent unregulated products. This reflects the additional compliance costs that lenders face under FCA regulation, including mandatory affordability assessments and enhanced documentation. The premium is typically 0.1% to 0.2% per month, but it is a factor worth considering when comparing options.
All figures quoted here are indicative and subject to change. Rates vary between lenders and depend on individual circumstances. For current rates tailored to your situation, consider obtaining a personalised quote. See our bridging loan rates page for more detail, or use the bridging loan calculator to estimate costs for your specific scenario.
Regulated bridging loans are used across a range of residential property situations where timing creates a funding gap. Because the loan must involve a property the borrower or family member will occupy, the use cases are tied to personal housing needs rather than investment.
Common scenarios include:
Each of these situations involves the borrower's residence, which is why the loan falls under FCA regulation. For scenarios involving investment or commercial property, see our guide to residential bridging loans for further detail on how different use cases are treated.
Applying for a regulated bridging loan follows a structured process, though it moves significantly faster than a standard mortgage application. Most regulated bridging loans complete within 2 to 4 weeks, with some straightforward cases completing in under 10 working days.
The determining factor is always the property's intended use. If you or a family member will live in it, you need a regulated product. For commercial or investment property, an unregulated or development bridging loan is the appropriate route.
Please note: the information on this page is for general guidance only and does not constitute personalised financial advice. Bridging loans are secured against property, and your home may be at risk if you do not keep up repayments. For advice tailored to your circumstances, speak to a qualified financial adviser.
Regulated bridging loans typically carry a slightly higher monthly rate than equivalent unregulated products, usually around 0.1% to 0.2% more per month. This reflects the additional compliance costs lenders incur under FCA rules, including mandatory affordability assessments and enhanced documentation. However, the difference is modest in most cases, and the added borrower protections that come with regulation, including access to the Financial Ombudsman Service, may offset the small cost premium for borrowers using their home as security.
Yes, it is possible to obtain a regulated bridging loan with adverse credit history, though options will be more limited and rates higher. Specialist lenders consider each case individually, looking at the severity and age of credit issues, the loan-to-value ratio, and the strength of your exit strategy. Defaults, CCJs, and missed payments do not automatically disqualify you, but they will affect the terms available. A specialist broker can help identify lenders with more flexible criteria.
Most regulated bridging loans complete within 2 to 4 weeks from initial application. Straightforward cases with clean title and a responsive solicitor can sometimes complete in under 10 working days. The mandatory affordability assessment adds a small amount of processing time compared to unregulated bridging, but the difference is typically only a few days. Having your documentation ready and using experienced bridging solicitors can speed up the process considerably.
Yes. Both the borrower and the lender require independent legal representation for a regulated bridging loan. Your solicitor handles title checks, contract review, and the transfer of funds on completion. Using a solicitor with specific experience in bridging finance is recommended, as they will be familiar with the pace and documentation requirements of short-term secured lending and can help avoid common delays.
Yes, a regulated bridging loan can be secured as a second charge behind an existing residential mortgage. This is a common arrangement when a borrower needs to raise funds against their home without disturbing their existing first-charge mortgage. The first-charge lender must consent to the second charge being placed on the property. Second-charge regulated bridging typically carries higher rates than first-charge lending due to the increased risk for the lender.
If you cannot repay on time, the lender is required under FCA rules to follow a structured arrears process before taking recovery action. This typically includes contacting you to discuss repayment options and considering reasonable forbearance measures. As a last resort, the lender may seek repossession, but this is subject to court procedures. You also have the right to raise a complaint with the Financial Ombudsman Service if you believe the lender has not handled the situation fairly.
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