B&C has been told it would be a mistake to presume that the Mortgage Credit Directive (MCD) won’t affect the bridging finance industry.
Asked if the sector should worry about the MCD’s impending implementation, Duncan Kreeger, Director of West One Loans, said a number of lenders currently offer products which will bring some bridging loans into the regulated sphere.
“Bridging lenders will be surprised by the far-reaching implications of the Mortgage Credit Directive,” said Duncan.
“While it’s true that the more momentous change will be in the second charge market, it would be a mistake to presume the new rules won’t affect bridging.
“The definition of what constitutes a regulated mortgage contract expands, thereby bringing loans which are currently unregulated into the regulated sphere.”
Duncan went on to add that bridging brokers need to stay alert as the new regulation could enhance the sector’s reputation.
“Given all these changes, it’s vital that brokers don’t bury their heads in the sand,” said Duncan.
“If they do, they risk missing out on the significant advantages that accompany the new legislation including the improving customer perceptions of the market.
“The new regulation enhances the reputation of the sector, opening it up to intermediaries who only provide regulated products to their customers.”
Roger Morris, Director of Sales at Precise Mortgages, agrees, saying that the introduction of the MCD will generate opportunities for brokers who put compliance at the heart of their business.
“Over many years I have been running workshops up and down the UK.
“What has now transpired is the brokers’ technical ability has grown dramatically and they now understand ‘complex structured finance’, thus we are seeing and will continue to see growth in bridging,” said Roger.
“But this market is now educated and only the lenders who have the right principles will truly grow.”
Ashley Ilsen, Head of Lending at Regentsmead, said the MCD would not directly affect the property development finance provider because it is sticking to unregulated lending.
He did, however, stress the importance of being aware of the changes.
“The wording of the legislation is such that some loans that may have previously been perceived as a ‘bridging loan’ may not be actually be classed as one, so it’s imperative that brokers are full[y] understanding and are entirely compliant with the new regulation,” said Ashley.
“It’s essential that all lenders understand what these implementations mean and the effect it could have on the market.
“I don’t see it necessarily changing our enquiry level, however, given how well publicised MCD is, this could be seen as bad timing given the upcoming in/out referendum in this country.”
Bob Sturges, Head of Communications at Fortwell Capital, said that as long as the UK remained in Europe, the bridging finance industry had little choice but to implement any legislation served up.
"The MCD is but the latest brilliant idea from Brussels to impose a one-size-fits-all standard on a highly fragmented and diverse continental-wide industry,” said Bob.
“What actual benefit derives to British consumers is hard to fathom.
"We have here one of the most rigorous and sophisticated regulatory systems in the developed world.
“Forged over decades - and learning from past mistakes - it is specifically designed to take into account the nuances of the UK mortgage market.
“The MCD adds nothing of any real value."
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