What Determines Whether a Bridge Is Regulated?
In the UK, **bridging finance** falls into one of two regulatory categories: regulated or unregulated. The distinction is not about the lender or the loan amount — it is determined entirely by the **purpose of the loan and the property involved**.
Understanding which category applies to your transaction is essential because it affects which lenders can offer you finance, the speed of the process, and the consumer protections available to you.
The Regulatory Framework
Bridging finance regulation in the UK is governed by the **Financial Conduct Authority (FCA)** under the Consumer Credit Act 1974 and the Mortgages and Home Finance: Conduct of Business sourcebook (MCOB).
The key rule is straightforward:
- If the property is, or will be, used as a dwelling by the borrower or their family, the loan is regulated
- If the property is for investment, commercial use, or any purpose other than the borrower's own residence, the loan is unregulated
This distinction **determines** the regulatory framework, consumer protections, and practical process for your bridging loan.
Regulated Bridging Finance
When Does It Apply?
A bridging loan is regulated when:
- You are buying a property to live in as your main residence
- You are remortgaging your own home using a bridge
- The property will become your main residence after works are completed
- A family member will live in the property
- You are using a bridge to prevent repossession of your home
Key Characteristics
**Consumer protections:**
- The lender must be FCA authorised to offer regulated mortgage contracts
- You receive a Key Facts Illustration (KFI) and European Standardised Information Sheet (ESIS) detailing all costs
- A 14-day reflection period applies after you receive the offer, during which you can withdraw without penalty
- The lender must assess affordability, not just the exit strategy
- Complaint rights: You can refer disputes to the Financial Ombudsman Service (FOS)
- FSCS protection: If the lender fails, you may be eligible for compensation under the Financial Services Compensation Scheme
**Process implications:**
- The application process is more thorough due to affordability assessment requirements
- Timescales are longer: The 14-day reflection period alone adds time, and regulated underwriting is more detailed
- Fewer lenders: Not all bridging lenders hold FCA permissions for regulated lending. The pool of available lenders is smaller
- Broker must be FCA authorised: Your broker must hold the appropriate permissions to advise on regulated mortgage contracts
**Typical timescale:** 2 to 4 weeks from application to completion.
Common Regulated Bridging Scenarios
- Buying your next home before selling your current one: You bridge the gap between purchase and sale
- Downsizing: Purchasing a smaller property quickly while your larger home is on the market
- Preventing repossession: Using a bridge to clear mortgage arrears and gain time to sell or refinance
- Buying an uninhabitable property to renovate as your home: The bridge funds the purchase, you refurbish, then you move in and refinance to a residential mortgage
Unregulated Bridging Finance
When Does It Apply?
A bridging loan is unregulated when:
- The property is a commercial premises (office, retail, industrial, warehouse)
- The property is a buy-to-let investment that will be rented out
- You are buying land for development
- The property is being purchased through a limited company or SPV
- The property is for any purpose other than your own residential occupation
Key Characteristics
**Flexibility:**
- No affordability assessment required: The lender focuses on the property, equity, and exit strategy
- No reflection period: You can complete as soon as the legal work is done
- Faster processing: Without regulatory constraints, underwriting is quicker
- More lenders available: The majority of bridging lenders operate in the unregulated space
- Broader criteria: Unregulated lenders can be more flexible on credit history, property type, and borrower circumstances
**Reduced protections:**
- No FOS complaints route (unless the lender voluntarily subscribes)
- No FSCS protection
- No mandatory affordability checks: You are responsible for ensuring you can repay
- No standardised documentation: Offer formats vary between lenders
**Typical timescale:** 3 to 14 days from application to completion.
Common Unregulated Bridging Scenarios
- Buying commercial property for investment or owner-occupation of a business
- Buy-to-let purchases: Residential property acquired as an investment to rent out
- Property development: Acquiring and improving property for profit
- Auction purchases: Fast finance for auction property
- Business cash flow: Raising funds secured against commercial property
- Company purchases: Any property bought through a limited company
**Key Takeaway:** The vast majority of commercial bridging finance is unregulated. If you are buying property for investment, commercial use, or through a company, your loan will almost certainly be unregulated.
Side-by-Side Comparison
Speed
- Regulated: 2-4 weeks minimum (reflection period adds time)
- Unregulated: 3-14 days (no reflection period)
Interest Rates
- Regulated: 0.50% to 1.20% per month (fewer lenders means less competition)
- Unregulated: 0.45% to 1.50% per month (wider range due to more lenders and risk profiles)
LTV
- Regulated: Up to 75% (some lenders cap at 70%)
- Unregulated: Up to 75% (some specialists offer up to 80% with additional security)
Affordability Assessment
- Regulated: Required by the FCA. The lender must verify you can afford the loan repayments
- Unregulated: Not required. The lender focuses on the exit strategy and property security
Borrower Types
- Regulated: Individuals only (you cannot regulate a loan to a company)
- Unregulated: Individuals, limited companies, SPVs, partnerships, pension funds, trusts
Reflection Period
- Regulated: 14 days after receiving the formal offer
- Unregulated: None. You can accept and complete immediately
Consumer Protections
- Regulated: FOS, FSCS, mandatory disclosure, cooling-off rights
- Unregulated: Limited statutory protection. Contract terms govern the relationship
Grey Areas and Common Confusions
Mixed-Use Property
A property with commercial ground floor and residential accommodation above creates a grey area. The regulatory classification depends on who will occupy the residential element:
- If you (the borrower) will live in the residential part: The loan is likely regulated
- If the residential part will be rented out: The loan is unregulated
- If the property is purely commercial with no residential element: Unregulated
Company Purchases of Residential Property
If a limited company buys a residential property, the loan is generally unregulated — even if a director intends to live there. However, lenders treat this area cautiously, and some will still classify it as regulated if there is any indication of personal occupation.
Intention vs Current Use
The regulation test looks at **intended use**, not current use. If you buy a commercial property intending to convert it into your home, the loan may be regulated from the outset. Conversely, if you buy a residential property intending to rent it out, the loan is unregulated.
Holiday Lets and Short-Term Rentals
Properties operated as holiday lets or short-term rentals (e.g., Airbnb) are generally treated as investments. Bridging finance for these properties is typically unregulated, provided you do not intend to live there yourself.
**Key Takeaway:** If there is any ambiguity about whether your loan is regulated or unregulated, disclose the full picture to your broker. Incorrect classification can cause delays or even invalidate the loan.
Implications for Brokers and Advisers
If you are working with a broker, ensure they hold the appropriate **FCA permissions**:
- For regulated bridges: The broker must hold permissions for advising on regulated mortgage contracts
- For unregulated bridges: FCA authorisation is not technically required, but working with an FCA-authorised broker provides an additional layer of professionalism and complaint resolution
At Commercial Mortgages Broker, we hold the appropriate permissions to arrange both regulated and unregulated bridging finance, ensuring you receive compliant advice regardless of your property type.
Which Is Right for Your Situation?
You do not choose whether your bridge is regulated or unregulated — the classification is determined by the facts of your transaction. However, understanding the implications helps you plan:
If Your Loan Is Regulated
- Allow more time: Budget at least 3 to 4 weeks for the full process including the reflection period
- Prepare for affordability checks: Have income evidence and bank statements ready
- Use a qualified broker: Ensure your broker is authorised for regulated mortgage advice
- Benefit from protections: The additional requirements exist to protect you. Use them — review the KFI carefully and take the reflection period if you need it
If Your Loan Is Unregulated
- Move quickly: The process can complete in days if you are well prepared
- Focus on the exit strategy: This is what the lender cares about most
- Read the documentation carefully: Without mandatory standardised disclosure, loan terms vary more between lenders. Ensure you understand all fees, interest calculations, and default provisions
- Choose your lender wisely: Without FOS as a backstop, your relationship with the lender matters. Work with reputable, established firms
Getting Expert Advice
Whether your bridging loan is regulated or unregulated, professional advice ensures you secure the right product at the best available terms.
[Contact Commercial Mortgages Broker](/contact) to discuss your requirements. We will confirm the regulatory classification of your loan and guide you through the process accordingly.
Use our [bridging finance calculator](/calculators/bridging) to estimate costs for your specific scenario.
Frequently Asked Questions
How do I know if my bridging loan will be regulated?
If the property is or will be your main residence (or that of a close family member), the loan is regulated. For investment property, commercial property, buy-to-let, or any property purchased through a company, the loan is unregulated.
Is regulated bridging more expensive than unregulated?
Not necessarily in terms of interest rates, but the process is slower due to mandatory affordability checks and the 14-day reflection period. The reduced speed can be an indirect cost if you are trying to complete a time-sensitive purchase.
Can I switch from regulated to unregulated bridging?
You cannot change the regulatory classification of a loan — it is determined by the facts of the transaction. However, if your plans change (e.g., you decide to rent the property rather than live in it), you may be able to arrange an unregulated product instead.
Do I need an FCA-authorised broker for unregulated bridging?
Technically no, but it is strongly recommended. FCA-authorised brokers are subject to conduct rules, professional indemnity requirements, and complaints procedures that provide you with an additional layer of protection.
What happens if a loan is incorrectly classified?
If a loan should have been regulated but was arranged as unregulated, the borrower may have grounds to challenge the enforceability of the loan agreement. For lenders and brokers, incorrect classification can result in FCA enforcement action. This is why accurate disclosure of your plans is essential.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*