MMR: Affordability rules for bridging

The Mortgage Market Review consultation paper 11/31 defines bridging loans as shorter than one year and proposes to force lenders to read across affordability rules for bridging loans where the borrower is expected to make monthly payments.

Lenders will also have to apply the affordability assessment to borrowers in the event the term of the loan is extended and subsequent repayments made on a monthly basis.

The paper says: “The vast majority of bridging finance is advanced on an interest roll-up basis and the consumer is never actually required to make monthly payments of either interest or capital.

“Therefore in these cases the lender would not need to make an assessment of the applicant’s ability to afford regular monthly mortgage payments.

“However, where the customer is required to meet monthly payments (whether it be interest-only or interest plus capital) we would propose to read across our affordability rules.”

The proposals also suggest lenders must have a clear policy to assess interest-only applications which sets out repayment strategies which the lender will accept and the controls in place around them.