Gavin Diamond is finance director at Cheval
The comments made by Sheila Nicoll, director of conduct policy at the Financial Services Authority, at the Mortgage Business Expo highlight a long-running anxiety of mine that some individuals are taking out bridging loans for the wrong reason.
At the London event Nicoll said that bridging loans often had a clear consumer benefit, but were likely to be a “far less appropriate option for borrowers in payment difficulties who may simply be putting off the inevitable by taking out a bridging loan”.
She acknowledged that the market was difficult for brokers, but stressed that a repeated concern of the FSA was that consumers were being pushed towards solutions “that could at best be described as imaginative”.
Mis-matching products to clients is never a good idea – least of all in the financial services sector, given its history.
I have always felt that the onus is not only on the broker to ensure that bridging loans are a sensible funding solution, but also on the lender.
Responsible bridging lenders will only ever lend if the rationale for the loan is sound and the deal makes sense - both from the perspective of the borrower and lender. This applies to all bridging loan applications, not only those that are regulated.
If the bridging loan is merely being used as a “fix” to delay the inevitable, lenders have a responsibility to decline the application. As an FSA-regulated lender that embraces TCF, we at Cheval have no choice but to turn down applications that do not accord with the best interests of the borrower.
It should be remembered that the broker is ultimately responsible for not only advising their client appropriately but also for placing them with appropriate lenders.
Different lenders have different agendas and risk appetites. Not all bridging lenders are part of a regulatory framework and therefore may not apply the same set of standards in assessing and accepting deals.
