Lloyds Banking Group has stated it is on track to be ready for the implementation of the Mortgage Credit Directive in March 2016, although some key requirements still need to be met.
The group said many of the EU directive’s elements are already practiced by its brands - Lloyds Bank, Bank of Scotland, Halifax, BM Solutions and Scottish Widows Bank - but there are still a number of changes required to ensure full compliance.
One of these will be to warn customers of the risks of the exchange rate changes on their borrowing.
As foreign currency loans only account for a small fraction of the group’s overall lending, it has already confirmed the cessation of lending to borrowers using foreign currency income to support a new mortgage or remortgage application across all brands from 28 September.
Elsewhere, the European Standardised Information Sheet (ESIS), which is being brought in to replace the Key Facts Illustration, will apply to Halifax Intermediaries and Scottish Widows Bank through the introduction of a new mortgage illustration.
Halifax Intermediaries Online and the SWB Online Mortgage Service will be updating to generate this new illustration ahead of next March, while the third party mortgage sourcing systems have been engaged to ensure their illustrations replicate these changes.
As BM Solutions currently only offers unregulated mortgages, there is no requirement to introduce an ESIS style illustration.
However, some minor changes to the BM illustration will be made, in line with the new HM Treasury rules which apply to consumer buy-to-let.
BM Solutions will accept consumer buy-to-let applications as part of the new regulatory framework introduced by MCD, while the One Minute Mortgage will be updated to enable identification of consumer buy-to-let customers at point of sale early next year.
The group also stated brokers have now been notified they will need to have the appropriate permissions and be fully registered with the Financial Conduct Authority to conduct consumer buy-to-let business.
Speaking in September, the FCA’s technical mortgage specialist Keith Hale, said the new regulatory regime will impact the UK’s mortgage market less than other EU member states, describing the changes as “incremental”.
However, trade bodies on either side of the channel have expressed exasperation at the rules.
Yesterday, the Council of Mortgage Lenders’ chairman Moray McDonald called the MCD a “complete waste of time”, while the European Mortgage Federation’s secretary general said some aspects of the new rules may be not be in the interests of the consumer.
Internal training on the changes brought in by the MCD will be completed at Lloyds before the end of the year and from January 2016 all national account and business development managers will be running MCD workshops across the UK to provide mortgage advisers with full details of the changes for the group’s intermediary brands.
Other lenders have also publicised their preparations for the 21 March deadline, with Skipton insisting it will use the ESIS documents from the start of 2016, while Nationwide revealed that its intermediary websites NFI Online and TMW Online are being updated to be compliant.
peter.walker@ft.com
