The government has today (26 January) published legislation which will incorporate new European regulations on mortgage lending into UK law, following a consultation process which saw the interpretation of the directive broadly welcomed by the industry.
Regulations set out transpose the Mortgage Credit Directive into UK law and contain other changes, including bringing the regulation of ‘second charge’ mortgage lending into line with ‘first charge’ mortgage lending.
The government said it had waited for the European directive before implementing this latter, in order to avoid excessive disruption to both lenders and customers.
A key area of the new rules introduces a new set of regulations for buy-to-let lending, where the lending is to consumers rather than for business purposes.
It is not expected that this will affect the vast majority of buy-to-let lending, however, as most loans are classified as being for business purposes and is therefore would only become subject to the directive where the borrower had periods of residence in the property, for example.
The legislation will shortly be laid in parliament and will now be subject to scrutiny by both houses.
The Financial Conduct Authority’s consultation on the changes that it will need to make to its rules in order to implement the MCD closed on 29 December. It will shortly be consulting on the implementation of the new regime for buy-to-let lending to consumers.
The Council of Mortgage Lenders recently criticised the implementation of the MCD, suggesting it will confuse UK customers if the FCA does not change its approach, warning of an absence of sufficient measures to manage the process.
However, the Association of Mortgage Intermediaries stated the response issued by the Treasury indicates a genuine desire to minimise the impact on firms and consumers.
Robert Sinclair, chief executive of the Ami, said that previous concerns over the interpretation of regulatory responsibilities lying at an individual level for credit intermediaries and appointed representatives has been clarified, so all references remain applicable to firms and their principles, rather than moving down to individual brokers.
“There will still be huge challenges for FCA, lenders and brokers in ensuring as seamless a transition as possible, due to the tight timescales involved, but AMI is committed to working with the wider industry to ensure consumers are impacted as little as possible.”
The Treasury received responses from over 30 stakeholders, primarily banks and building societies, as well as a range of trade bodies and some consumer groups.
On the timeline for implementation, respondents generally recognised that this was driven by dates set in the directive, they were supportive of government’s efforts to finalise the rules as quickly as possible, but commented that this still made for a tight implementation timetable.
The government’s response was to make it possible for all firms subject to the MCD to adopt the revised rules up to six months ahead of implementation in March 2016.
peter.walker@ft.com
