Meanwhile, 20 months away..the European mortgage directive!
Published: 16 July 2014 | Author: Bernard Clarke
While work on assessing the impact of the mortgage market review (MMR) continues, another major regulatory reform is looming on the horizon for lenders – implementation of the European mortgage credit directive in March 2016.
Some of the effects of the directive in the UK will be determined by how it is interpreted by both the Treasury and the Financial Conduct Authority (FCA). The Treasury has to transpose the directive into UK law and will need, for example, to develop a national framework for buy-to-let lending. The FCA, meanwhile, will assume the role of the national financial regulator with responsibility for implementing the rules.
Both the Treasury and the FCA will consult publicly later this year on how they propose to fulfil their roles, and we will work closely with lenders to ensure their views are heard as part of that consultation process.
Earlier this year, the former financial secretary to the Treasury, Sajid Javid, told guests at our annual lunch that the government would seek to do only what was necessary to implement the directive to "minimise the disruption…in line with our wider priority of reducing regulation on business." We would urge both the Treasury and the FCA to continue to adopt this approach.
Looking in more detail at the proposals, it is clear that there are important issues for lenders, including requirements on early repayment charges, the European standardised information sheet, the right of the consumer to a reflection period, foreign currency loans and interest rate risks.
Additionally – and unlike the MMR – there is no proposal for a transitional period for introducing any new rules required as a result of the directive. What this could mean in practice is that all applications have to be processed in compliance with the directive by 21 March 2016 – the date on which the European requirements are due to be transposed into UK law.
We are seeking to encourage the Treasury and the FCA to agree that any mortgage that a customer applies for before the March 2016 deadline – but which is advanced after that date – should go through without the need to comply with the directive (unless there is a material change after the date the directive is due to become law). Implementation in this way would be similar to the transitional arrangements for the MMR, were a contributory factor to the relative ease with which the market has moved to the new rules.
Another challenge is the tight timetable, with many details still to be resolved – and just 20 months until the directive comes into force. The consultation processes with the Treasury and FCA will begin shortly, and we will work closely with members on our response.