MCD: Bridging firms could still fall under new rules, warns FCA

The MCD definition of bridging, which will apply from 21 March 2016, states that a bridge can be either a regulated mortgage contract or an article 3 (1)(b) credit agreement of no fixed duration or repaid within 12 months.

The regulator has previously said it does not expect any bridging loans which currently meet its definition to fall outside the scope of the MCD's version of a bridge.
 

However, the regulator asked to hear the opinions of advisers and lenders, and concerns were raised. One trade body noted its concern that bridging loans where the exit is sale of property could be caught by the MCD, which could potentially require firms to run two sets of processes to cover both MCD and non-MCD loans, according to the exit strategy.

Despite this, the FCA today said:

“We intend to proceed with this proposal as consulted on. It is possible that some regulated mortgages that are bridging loans will be caught by the MCD, where they do not meet the definition of an MCD exempt bridging loan. Where this is the case, firms will need to comply with the relevant rules for MCD regulated mortgage contracts”