Alan Margolis, head of bridging at United Trust Bank said that he is particularly pleased that the FSA will permit interest only loans where borrowers will not service the monthly interest payments.
He said:
“By permitting interest only loans where borrowers do not have to evidence affordability, the FSA has acknowledged that within the broader pantheon of mortgages, there are people whose requirements are not met by mainstream mortgage products.
"The flexibility provided by the MMR to lenders in such cases is tremendously good news and a move away from the one size fits all approach that characterised the approach to the mortgage market in the past.
“The Bridging sector has shown that it is possible to be both simultaneously creative and responsible in designing products that meet niche demands.
"Our bridging loans are tailored to the specific demands and circumstances of our customers and the MMR will allow us to continue to meet the need for such loans."
The bank also believes that a key factor in the MMR’s flexibility is a result of the dialogue over the past couple of years between the FSA and the Association of Short Term Lenders which represents many of the leading players in the sector.
Previously there was no MCOB definition of bridging loans. Now not only is there a definition, but the proposed rules acknowledge one of the key features of many bridging loans, namely that customers do not need to make monthly interest payments and that there are many different exit possibilities.
Responsible short term lenders have always required there to be genuine and realistic exit routes and this is now in effect codified.
United Trust Bank believes that the formal recognition of bridging loans and the MMR’s flexibility which was likely to have been influenced by the astl’s representations mark the coming of age of the sector which is increasingly being recognised as a legitimate and useful mortgage product for some customers by an ever increasing number of mortgage professionals.
