The Mortgage Market Review consultation paper 11/31 says brokers will be required to consider whether it is appropriate for the customer to “access finance quickly” and to “make regular payments” before recommending a bridging loan.
The paper said: “We are concerned that consumers may be taking out bridging finance when a mainstream mortgage product would have been available and more appropriate.
“In order to address this risk we are proposing to require that where an intermediary is providing advice he determines as part of the sales process why a mainstream mortgage was not appropriate for the consumer.”
Analysis of the bridging market by the FSA revealed around 70% of bridging sales are intermediated and of these only about 40% are sold with advice.
The paper said: “Once the intermediary has identified a bridging loan as being the appropriate product, they must make sure the consumer is aware that they will need to demonstrate to the bridging lender that they have a clearly understood and credible repayment strategy in place to repay the loan.”
Brokers will also be required to disclose whether they offer advice on a whole of market or restricted basis within the bridging sector specifically.
