Lenders welcome support on dual APRC controversy
Published: 7 May 2014 | Author: Bernard Clarke
Following the successful introduction of new lending rules as a result of the mortgage market review (MMR), lenders are now turning their attention to the next major challenge on the regulatory timetable – the implementation of the European directive on mortgage credit.
After the directive was recorded in the official register of the European Union in February, there follows a period of two years and 20 days for member states to transpose it into national regulation. That gives a final implementation date of 21 March 2016.
One of the most contentious parts of the directive is that for every mortgage sold (unless it has a rate that is fixed for five years or more) lenders will need to disclose to consumers an additional annual percentage rate of charge (the "dual APRC") illustrating how the mortgage would have been affected by movements in interest rates over the last 20 years.
We believe that supplying this information will not help consumers. Potentially, it is a source of confusion. There are also problems in providing like-for-like comparisons for lenders now offering products that differ from those they offered in the past, or for firms that may not have been active in the market for the last 20 years.
However, the industry will have been encouraged by two recent comments on implementation of the directive.
At a recent press briefing, the director of mortgages and consumer lending at the Financial Conduct Authority, Linda Woodall, said the UK would not implement the European rule on historical APR if it had a choice.
She said: "Unless there is something that is maximum harmonising, where we are literally required to make a change, we want to keep things as simple as possible. I don’t think we have exact clarity on that [whether the rule on historical APR must be implemented] but I am not aware that we have to do that.
"But if we do not have to, then we wouldn’t. We think we have got a regime that works for us."
Meanwhile, on an earlier occasion – at our annual lunch at the beginning of April – the former financial secretary to the Treasury, Sajid Javid, expressed a similar view.
"I have been clear about my views of the merits of this directive," he told more than 500 guests at the lunch. "I'm not convinced of the benefits of these regulations to UK consumers or to UK businesses.
"And that is why our approach to implementing these will be to, wherever possible, minimise the disruption they cause, which will be very much in line with our wider priority of reducing regulations on business."
We welcome these helpful comments from the Treasury and the FCA, and plan to work with others allied to the lending industry for as much harmonisation as possible between European requirements and the new rules that have now been introduced in the UK as a result of the MMR.