What is Regulated and Unregulated in Bridging Finance?

Bridging loans or bridge finance, will typically fall under regulated or unregulated activity - and this can have quite an impact on the application process, eligibility and terms that you receive. In this article, Octagon Capital aims to explain the difference between regulated and unregulated bridging - and how you can find the best product for you.

As a rule of thumb:

  • Any residential bridging is regulated (if it is their primary residence)
  • Any commercial bridging is unregulated (including offices, garages, warehouses)


Regulated Bridging Unregulated Bridging
70% Maximum LTV 75% Maximum LTV
First and Second Charge Mostly Second Charge
Subject to Status All Credit Statuses Considered

What is the regulation for bridging loans?

When it comes to regulated bridging loans, the FCA is the main regulator in the UK for any mortgages or deals. Essentially, they have strict regulation and guidelines in place to ensure that borrowers do not risk losing their primary residence when borrowing and there is adequate protection in place.

So typically, you can borrow against residential properties, such as buying a place for buy-to-let purposes. However, you cannot borrow a regulated bridging loan if it is secured against your own primary residence.

Part of this is the Mortgage Credit Directive (MCD) which is an EU framework for mortgage firms and is overseen by the FCA. There are a number of measures in place to offer transparency to customers, such as showing them any rates beforehand as an APRC and also giving applicants a reflective period in case they want to change their mind or request more information.

For the regulation surrounding SMCR, this is for senior managers of investment firms under the FCA - and does not apply in this case.


bridging finance

Borrowing against flats and places of primary residence will typically fall under regulated activity


Regulated bridging loans and mortgages are available by first charge or second charge

First charge loans

This refers to the 'first charge' that is taken from your bank account each month, so often refers to as your first mortgage, which could be against your main residence and property that you live at, or an investment.

Second charge loans

This refers to the 'second charge' from your bank account, taken out after your first charge. So you could have a mortgage against your home (this is your first charge) and then another mortgage or bridging loan against an investment product (this is your second charge). You can also get a second charge against your existing home, known commonly as a second mortgage.

Importantly, the amount you can borrow on your second charge is less than your first charge, since it is second in the queue when it comes to repayments each month.

You can use the same lender for both first and second charge, or use a different one for each.


What is unregulated bridging loans?

When bridging loans are unregulated, they are conforming to some essential guidelines, but there are a lot of flexibilities when it comes to the criteria and lending to people with adverse credit histories. Loans in this nature are commonly by means of second charge, and with faster processing and applications, they typically make up around 50% to 60% of all bridging deals (regulated rarely gets more business than unregulated in this sector).

Unregulated business is often for commercial properties including:

  • Offices
  • Petrol garages
  • Schools/ Hotels/ Farmhouses
  • Warehouses
  • Factories
  • Gyms
  • Other business purposes


Offices will typically fall under unregulated activity


What does non-status bridging loans mean?

Non-status bridging means that it does not take credit status into account. So where regulated mortgages and most financial products require a strong credit score, this is not the case with non-status lending. Therefore, lenders are willing to take a view on adverse credit histories or limited credit histories and may look at other factors such as the potential value of your property and the opportunity.



Camrose London Launches Latest Showroom

Camrose London have been busy since the lockdown ended and are delighted to be launching show homes in September for their latest developments.

Westcombe House, a beautiful collection of 34 apartments in the heart of Royal Tunbridge Wells will open its show home doors in September, with completion for the scheme expected Q4 2020. Prospective purchasers will benefit from stamp duty savings and all of the apartments are available with the government help to buy scheme.

The Arbor Collection, a boutique development of 27 apartments in the heart of NW6 will also be launching with a show home in September. With balcony views over the neighbouring park and connectivity into central London in under 15 minutes, the Arbor Collection offers luxury Parkside living.  Completion is expected for Q4 2020 meaning prospective purchasers would also benefit from the reduced stamp duty tax.


Chancellor Sunak Proposes Immediate Change to Stamp Duty

Rishi Sunak has stated that a stamp duty cut will not be delayed, following warnings that this would cause considerable damage to the housing market. Talk of delaying the stamp duty cuts have raised fears that property purchases would grind to a halt, as many would simply wait until these cuts were implemented to save themselves thousands of pounds.

Economists and property experts have voiced their concerns over implementation of the cut, originally suggested to be put in place Autumn this year. Such experts have claimed that waiting until this long to put the cut in place could cause a deep freeze to the housing market.

Institute for Fiscal Studies’ Paul Johnson has commented that Sunak must choose to launch the stamp duty cut tomorrow or rule it out entirely, and furthermore that “To do otherwise could ruin the housing market for months to come”

Economist Julian Jessop commented the following on the matter: “the announcement of a stamp duty holiday, but not until the autumn, could kill the housing market in the meantime.” 

“There has been similar speculation of an across-the-board VAT cut, which could delay spending on other big ticket items too.”

Others have claimed that this cut to stamp duty could help to drive the demand for housing throughout the U.K., former Tory Chancellor Philip Hammond commenting on the BBC Radio 4 Today programme that:

'Cutting stamp duty, reducing VAT in particular sectors, are certainly ways to bring forward or manage demand. 

'But I think the Treasury officials who will have been working up all sorts of proposals for him during the lockdown will be telling him that the history tells us that cutting VAT or cutting stamp duty can bring forward demand but it doesn't overall increase the level of demand, it simply shifts the pattern of it.' 

This cut is expected to be part of Sunak’s coronavirus recovery package, including ‘holiday’ from the charge of six months. Sunak is under increasing pressure to set out future plans for financial support for businesses, as many sectors continue to struggle from the effects of the COVID-19 pandemic.

The stamp duty cut is said to be the focus for the Chancellor’s financial address tomorrow, which is also expected to discuss the £2 billion to be used for homeowners to better insulate their properties, and the £1 billion that will attempt to make hospitals and schools greener.


Storage Wars: UK Cities Paying Nearly Double for Self-Storage 

  • Londoners pay 107% more per week than average for a 50 sq. ft. storage unit
  • Camden is the most expensive place to rent storage space in the UK (up to £101.63 p/w)
  • Local 100 sq. ft. units cost 8% of a Londoners average wage, 7% of Swansea and 6% of Manchester, Liverpool and Newcastle


New research from bridging loans broker Octagon Capital reveals the cities in the UK getting the worst deals on self-storage units, with Londoners paying significantly over the odds at a rate 107% higher than the national average.

Looking at the average cost of a 50 sq. ft. unit in locations around the country (ideal for storing the contents of a one bedroom flat), London is the most expensive, with customers likely to spend an average of £1,797 per year.

Considerably higher than second place Swansea, which has an average of £1,006 per year for the same sized unit. Exeter residents are getting the best deal in the country, paying 31% less than the nationwide average (£598 p/y).


Average annual cost for 50 sq. ft. unit (£) Percentage Difference from Nationwide Average
London 1,797 107%
Swansea 1,006 16%
Liverpool 958 10%
Edinburgh 892 3%
Manchester 882 2%
Bristol 833 -4%
Newcastle 803 -7%
Cardiff 765 -12%
Birmingham 745 -14%
Glasgow 700 -19%
Portsmouth 650 -25%
Southampton 650 -25%
Exeter 568 -31%
Nationwide Average 868


This trend continues when looking at 75 and 100 sq. ft. sized units, ideal for a two-bed flat or house, with London topping both tables and costs averaging 110% and 100% more than the average respectively. Liverpool similarly finds itself at the top end of the table for each unit size analysed, paying 12% more than average for 75 sq. ft. (£1,238 p/y) and 17% more for 100 sq. ft. (£1,674 p/y).

Camden in London has the highest individual costs per year for 75 sq. ft. and 100 sq. ft. units (£3,542 and £5,285 p/y respectively), while also placing second for 50 sq. ft. (£2,909 p/y) behind Kennington (£3,024 p/y).

Even when taking into account the average weekly wage in areas around the country, Londoners are still paying over the odds. For example, a 100 sq. ft. storage unit costs 8% of the average weekly wage of a Londoner, compared to just 3% of Portsmouth residents at the other end of the table. On average, 5% of the weekly wage would be spent on a storage unit of this size.

Dan Kettle of Octagon Capital, commented: “There are many factors that affect pricing in cities around the UK, but the large difference in costs between London and the rest of the UK is still significant when you take into account the proportion of the average wage that relates to.

“The best way to get a good deal on self-storage is to ensure you select the right sized unit so you’re not overpaying on space, and always shop around. There may be a better deal with a different company and don’t forget to try and negotiate costs.

“At Octagon Capital we provide bridging loans to assist those looking to embark on a project such as a move, renovation or refurbishment where self-storage is often needed.”



Data consists to quotes for various sized self-storage units by Big Yellow, Safestore, Shurgard and Lok’nStore on w.c. 29th July 2020, with annual costs reflecting the weekly cost multiplied by 52

Average wage data via Centre for Cities: https://www.centreforcities.org/data-tool/#graph=map&city=show-all&indicator=average-weekly-workplace-earnings\\single\\2019



Mortgage Brokers Expect a 6 to 9-Month Recovery

The COVID-19 lockdown has had a considerable impact on the property industry, potential property buyers limited in viewing new potentials, whilst those in the bridging finance sector were forced to stop all lending, able to only work on existing deals they were already managing.

It’s been confirmed by mortgage lenders all over the U.K. that there will be significant restrictions to lending criteria. On top of this, there have not been any property auctions to have taken place recently – an important source for generating commercial deals within the industry.

An MT Finance survey found that 54% of participants predict the economy to take 6 months to a year to recover from the impacts of COVID-19, 14% seeing a recession in the foreseeable future.

In the same survey, 40% of mortgage industry brokers feel the property market will need six to nine months to recover properly from the impacts of COVID-19.

Additionally, MT Finance also found that 27% expect it to be a year or more for the market to fully recover.

Gareth Lewis, MT Finance commercial director, commented: “These results offer an interesting insight into just how long those working in the industry believe the UK property market and wider economy will take to recover.

“While the government’s furlough scheme has evidently had a positive impact on unemployment- some further government stimulus would be very welcome to resurrect the property market once lockdown is lifted, such as a stamp duty holiday or concessions.”


Homeowners Offered Additional Three Month Mortgage Holiday

During the beginning of the U.K.’s lockdown period, a near 1.8 million households took advantage of the three-month mortgage payment holiday as a means of support during this difficult time.

The mortgage payment holiday scheme saw around 20% of the U.K.’s total population benefit from its offerings, which not only included a break from mortgage payments, but also other financial support products such as credit cards, personal loans, interest-free overdraft facilities and more.

The Financial Conduct Authority (FCA) have confirmed a second term of mortgage payment holidays will be made available if the U.K. are hit with a second wave of COVID-19, and subsequent lockdown measures reappear.

Interim chief executive of the FCA Christopher Woolard confirmed:


“Clearly, if there are further restrictions that need to be placed for health reasons; if the situation becomes
more complicated in some way, then we’ll have to think about how we adjust to those circumstances,”

However, whilst a second mortgage holiday is now on the cards if a second wave were to appear, Woolard expressed that 50% of those who used these payment holidays initially were now able to make payments:

“About half of that group are people who perhaps thought they were going to lose a job or have some
other kind of impact, and in fact they’re in a position where they could still afford to pay now that that
ninety-day period is coming to an end,”

“It’s everyone’s best interest to actually get back towards payment wherever that is possible or even
partial payment, but we have to recognise that there’s an ongoing situation here,”


Specialist finance provider at OctagonCapital Dan Kettle commented: “Taking mortgage payment holidays
might seem like a healthy way to keep your finances in track and it certainly plays an important role for a
lot of homeowners. However, you may look to remortgage at some point or maybe even apply for a new
mortgage altogether if you plan to move home soon.

“With mortgage providers only getting stricter with their criteria, you probably don’t want to have any
payment holidays on your credit report, so if your job and income is stable, you should ideally try keep up
with payments and avoid holidays if you can.”


Budget 2020 - Stamp duty may be reduced to help first-time buyers

The delivery of next week’s Budget by chancellor Rishi Sunak may see changes to how stamp duty works for first time buyers. It is thought there is a possibility that stamp duty may be made lower for those purchasing homes worth £500,000 or more. 

How does stamp duty work for first-time buyers?

Currently, first-time buyers in England and Northern Ireland do not have to pay any stamp duty on the first £300,000 for a property worth up to £500,000. These buyers are then required to pay a 5% stamp duty tax on the portion between £300,000 and £500,000. If the property is worth under £300,000 then no tax is paid at all. These new stamp duty rules have been in force since 2017.

However, not all first-time buyers currently benefit from this tax exemption. This is because the exemption is not in place for those who buy a property in excess of £500,000. These buyers do not receive any stamp duty relief and are required to pay the duty in full.

As of 22 November 2017, first-time buyers who purchase a property under a Shared Ownership scheme can now also claim stamp duty relief on homes that are valued up to £500,000.

Who classifies as a first-time buyer?

A first-time buyer in the UK is someone who has never owned a freehold or had a leasehold interest in an UK or overseas residential property. This will be the first time they have made a purchase on a residential property.

It is important to be aware that if you are married and you are going to buy a property together, both need to meet the stamp duty relief requirements to get the first-time buyer exemption.

What could these potential changes mean for first-time buyers?

If the latest Budget does reveal an increase to the stamp duty exemption threshold, this could be very welcome news for first-time buyers purchasing houses in London and the South East, where house prices are higher.

A Director from GriggsHomes.co.uk commented on this possible change: "Changes to stamp duty will have a huge impact for first-time buyers and those struggling to get on the ladder. From a developer's perspective, it is very exciting knowing that demand for new builds and properties will be higher and people might have bigger budgets too, especially since stamp duty may be much lower or even abolished for first-timers buying a property under £500,000."