MEPs last week passed the final rules of the European Mortgage Credit Directive.
The rules were agreed in September but an official vote was delayed until the Council of Ministers had decided how member states would transpose the rules into their respective national regulatory systems.
The UK will have two years to introduce the rules once the final text has been ratified by the Council and published in the official journal of the EU, which is expected to happen early next year.
Many of the new rules mirror those contained in the UK’s Mortgage Market Review, especially around lenders’ obligation to ensure borrowers can afford their mortgages. However, some rules do not appear in the MMR, such as that requiring lenders to provide an extra APR for borrowers tied in for under five years which states the maximum they would have been charged on the lender’s SVR over the past 20 years.
A new European standardised information sheet will replace the key facts illustration used in the UK but the FCA could opt to keep the KFI for up to five years. Under the rules, borrowers will be entitled to a “reflection” period of seven days although they can proceed with the transaction during this period if they wish to do so.
Originally, the directive would have captured buy-to-let mortgages but the UK mortgage industry successfully argued for a carve-out.
Building Societies Association mortgage policy adviser Sharon Chapman says: “The UK achieved some wins but we are still left with unwanted provisions.”