Are commercial mortgages regulated by the FCA?

Commercial mortgage borrowing is at an all time high, with UK lending activity in this sector reaching £49.8 Billion in 2022. But so much activity begs an important question—are commercial mortgages regulated by the FCA and if not, how are you, the borrowing company, protected?

What is the FCA?

The Financial Conduct Authority, also known as the FCA, is the UK’s regulatory body for financial services. Think ‘Ofcom’ but for the financial markets.

They protect consumers through a range of methods, including stepping in when unfair activity takes place and ensuring a competitive environment thrives among Britain’s financial institutions. Too much business centralised around one specific company can lead to a monopoly – the FCA works to stop that from happening.

They also help teach the general public about financial products, help protect UK citizens from financial scams, and take legal action and hand down fines when a regulation is broken.

They predict that for every £1 they spend, they create £11 in value for SMB’s and consumers.

Are commercial mortgages regulated by the FCA?

Mortgages for commercial properties and buy to let mortgages are not usually regulated by the FCA. The exception to this rule is that when more than 40% of a property is used for residential purposes the FCA may regulate the mortgage. For example, if someone were to take out a semi-residential mortgage, depending on the conditions of that mortgage, it’s possible the mortgage may be regulated by the FCA.

Because commercial mortgages are not usually regulated by the FCA, at least, not in the way residential mortgages are, there are fewer protections in place for commercial borrowers than there are for residential borrowers.

This means if you’re planning to take out commercial property finance, you should research your options carefully. Always read any information handed to you by the lender, and enlist independent advice from a knowledgeable source before signing anything.

How are commercial mortgages regulated?

While commercial mortgages aren’t regulated by the FCA in the typical way, many of them adhere to their own set of tight regulations. For example, traditional banking institutions usually play by a code of conduct and if a representative of theirs steps out of this code, the institution would consider this a breach of their internal policies and action may be taken. 

Confirm with your lender before signing what their internal policies are and ensure they align with your own values and expectations.

Another way commercial mortgages are regulated is by contract law, which says the terms of a contract are binding, so the lender should not be able to violate their end of the contract.

Lastly, affordability checks are a form of regulation, in that they prevent businesses from taking on more debt than they can pay back.

I think I’ve been treated unfairly, who can I talk to?

If you feel you have been unfairly treated by a lender the FCA is available to help. Borrowers, commercial or otherwise, should never be misled and the FCA exists to protect the public.If you feel a financial company has treated you or your company unfairly, you can make a complaint to the FCA.

Apply for a commercial mortgage with Funding Options by Tide

Looking for a mortgage to fund your commercial property? We help everyone from bakeries to property developers to start ups find funding solutions for their property needs. Just click the link below to find out if you’re eligible to work with one or several of the 120+ lenders in our network.

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Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.