Bridging sidesteps EU Mortgage Directive rules

Bridging finance is set to remain exempt from a set of oncoming regulation changes to lending in the UK.

This week, the Government announced its strategy upon incorporating European mortgage lending regulations into the UK’s legislation. This movement includes bringing the regulation of ‘second charge’ finance or homeowner loans in line with the ‘first charge’ market.

As bridging loans are already subject to some FCA regulation the Government is keen to preserve the existing regulation.

Residential buy-to-let lending will be impacted. However, the new EU regulations are unlikely to affect buy-to-let lending for commercial purposes which represents the vast majority of the market.

The reforms will be implemented in March 2016. HM Treasury noted: “…the government is putting these in place now in order to give mortgage lenders and customers as long as possible to prepare for them.”

According to a poll conducted by United Trust Bank, bridging brokers see the threat of another Eurozone recession as the biggest hazard to the UK economy.

Managing Director of United Trust Bank, Harley Kagan, reminded readers that the International Monetary Fund (IMF) recently estimated there was a 40 per cent chance of the Eurozone having another recession. Also that the Eurozone is running at just over 11 per cent of unemployment.

“The Eurozone has very low levels of inflation with some countries such as Italy, Spain and Greece already in deflation. Deflation can be disastrous for economies trying to service debts and can dissuade individuals and businesses from spending and investing, hitting corporate profits, costing jobs and cutting tax revenues,” he continued.

The recent regulation announcement is the latest in a number of major reforms which have already been introduced to mortgage lending. These include creating new, stronger regulators with powers to make sure people can only borrow what they can afford to repay.

Read the EU mortgage regulations by clicking here.

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