Regulated vs Unregulated Bridging Loans: A Clear, No-Nonsense Guide
Bridging loans are short-term finance tools used to “bridge” a gap between money needed now and money arriving later. In the UK property world, they’re most common when you need fast access to cash, for example, to buy a property at auction or to complete a chain break. They’re inherently higher cost than standard mortgages because they’re short term and lenders carry more risk.
But not all bridging loans are treated the same. They split into regulated and unregulated categories, and the difference matters a lot.
What is a regulated bridging loan?
A regulated bridging loan is one that falls under the rules of the Financial Conduct Authority (FCA), the UK regulator responsible for protecting consumers in financial markets.
This type of loan must be secured against a residential property that the borrower, or a close family member, currently lives in or plans to live in. The FCA treats this like a mortgage, which means lenders must follow strict conduct rules, including affordability checks and transparent disclosure of terms and costs.
In practice, the most common use for a regulated bridging loan is a chain break, you’re buying your new home before your existing one has sold. Because it’s your home (or future home), consumer protection rules apply.
Key characteristics of regulated bridging loans:
- FCA oversight and consumer protections apply.
- Affordability assessments are required.
- Typically shorter and more structured terms (often linked to the sale of a property).
- Designed for personal residential use, not investment or business purposes.
The FCA rules mean consumers have recourse if something goes wrong – for example, through the Financial Ombudsman Service, and lenders must act fairly and transparently.
What Is an Unregulated Bridging Loan?
An unregulated bridging loan is exactly what it sounds like: a bridging loan not covered by FCA consumer regulation. These are typically used by businesses, investors, developers or anyone borrowing against property that isn’t their residence.
Because the borrower is assumed to be a commercial entity or an experienced investor, FCA protections don’t apply. That doesn’t make them illegal or unsafe in themselves, it just means you don’t get the same legal protections as with a regulated loan.
Common unregulated scenarios include:
- Funding purchase of buy-to-let or commercial property.
- Raising cash for development or refurbishment projects.
- Bridging finance across a portfolio of investment properties.
Main differences from regulated bridging:
- No FCA consumer protections.
- Faster, more flexible underwriting.
- Often used for larger, commercial deals.
- Terms can be longer and criteria less strict.
Unregulated doesn’t mean reckless, but it does mean you’re on your own with risk and suitability. It’s essential to understand the costs, your exit plan and your ability to repay without FCA safety nets.
The core distinction
The simplest way to remember the difference:
If the loan is for a property you or your family will live in, it’s regulated. Everything else is unregulated.
You don’t get to choose which regime applies. Whether it falls under FCA rules is dictated by:
- Who the borrower is (individual vs business).
- What the property will be used for.
- Whether it’s a first-charge on your home.
Practical implications for borrowers
Consumer protection: Regulated bridging loans come with safeguards designed to prevent mis-selling and unfair terms. If something goes wrong, you can escalate through the Financial Ombudsman. Unregulated loans offer no such safety net.
Speed and flexibility: Unregulated loans generally close quicker and can be structured around more varied business needs. Regulated loans involve more checks, so they can take longer to arrange.
Interest and cost: Unregulated bridging tends to carry higher rates because lenders assume more risk and operate without FCA constraints.
Final word
Bridging finance is a legitimate and powerful tool when used correctly. Understanding whether a loan is regulated or unregulated isn’t just legal jargon, it determines your protections, how quickly you can act and what responsibilities you take on as a borrower.
If you’re arranging bridging finance, get clear advice up front. Know the purpose of the loan, how you’re going to repay it and whether you’re covered by FCA protections. That’s the difference between using a financial tool and being burned by one.
