Jeremy Wood, chief executive of Dudley Building Society, has called for the extension of FCA arrangements to stop some borrowers becoming so-called mortgage prisoners under the MCD.
Mr Wood said: “The raft of regulation under MMR was specifically designed to keep the interests of customers foremost.
“The FCA had carefully put in the transitional rules arrangements, which meant that existing borrowers would not be at a disadvantage from the new affordability rules when their current deals ran out, or they wanted to remortgage, and yet our European lawmakers have seen fit to torpedo this.”
Earlier this year, in its 319-page policy statement Implementation of the Mortgage Credit Directive and the new Regime for Second Charge Mortgages, Feedback to CP14/20 and Final Rules, the FCA revealed some existing borrowers looking to make changes to their mortgage would have to undergo affordability assessments.
As part of the FCA’s implementation of the EU directive, from 31 March 2016, lenders taking on existing borrowers from rivals would have to use an affordability assessment.
Consumers wishing to change their mortgage with an existing lender would not have to undergo an affordability assessment, provided there was no additional borrowing and no other changes to terms likely to be material to affordability.
|Key facts about the MCD|
The MCD introduces a European framework of conduct rules for firms selling both first and second charge mortgages
|The FCA has aimed, where possible, to implement the directive using provisions in existing FCA rules|
|The majority of the FCA’s final rules come into effect on 21 March 2016|
However, Mr Wood warned that there was no compulsion for borrowers affected by these changes to be treated fairly, and that if interest rates increased, consumers trapped on standard variable rates could suffer.
He therefore has called on brokers and smaller lenders to fight for transitional FCA rules to be extended beyond March 2016, when the MCD comes into place, saying: “Unfortunately, there is no incentive for the larger lenders to raise their voices on the topic, but there is nothing stopping the intermediary community and smaller lenders from taking up the cause.”
Stuart Carnall, financial adviser for Derbyshire-based Andrew Stuart and Company, said: “I do not think we need specific rules (such as the FCA transitional arrangements) to protect consumers but lenders should use common sense when looking at borrowers’ applications.”