Call to ditch overpayment fees and bring in cooling-off period riles CML
Share
A European committee set up to scrutinise the mortgage directive is calling for overpayment charges to be scrapped and a cooling-off period for mortgages introduced.
A cooling-off period was proposed in the draft stages of the directive in January but was not included in proposals in March this year.
Two European committees were set up in March to assess the directive - one with responsibility for economic and monetary affairs, ECON, and the other overseeing internal markets and consumer protection, IMCO.
ECON has suggested a range of proposals to add to the directive.
These include a cooling-off period for borrowers of at least 14 working days after a mortgage offer is made and compensation for consumers if credit is rejected because a reference agency supplied an inaccurate report.
ECON also calls for each member state to publish prudential requirements, including LTV, loan-to-income, debt-to-income and loan-to-asset ratios.
It also calls for borrowers to be allowed to make overpayments without penalty and then be able to draw down in the future any overpayments made.
A ban is also proposed on arrears charges if payment problems arise that are beyond the control of the borrower.
The Council of Mortgage Lenders has hit out at these proposals.
In its latest News & Views newsletter, it says: “There is little apparent acknowledgement of the potentially damaging impact the proposals could have on lenders and the wider mortgage market and therefore on consumers too.”
It is calling for a cost benefit and impact analysis to be carried out.
But Robert Sinclair, director of the Association of Mortgage Intermediaries, says the proposals would impact lenders more than brokers.
He says: “Lenders do not want to be in a place where a borrower can draw down overpayments made as it will prevent the lender using that money to lend to others.”
Sinclair says the proposal for a cooling-off period is pointless in a country such as the UK that offers advised sales which can take a long time to complete because of the legal work.
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
