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Offset wins exemption from European rules

Offset mortgages will not be banned in the European mortgage directive after fears they could fall under proposals to ban bundled mortgage products.

Last week, Mortgage Strategy revealed savings-linked mortgage deals such as Lloyds Banking Group’s Lend a Hand scheme are set to be banned by the European Union.

The move could also impact other first-time buyer deals with parental guarantees from National Counties Building Society, Bath Building Society and Aldermore.

The European Mortgage Federation expects the ban on bundled products to be in the final directive but offset mortgages are exempt.

Jennifer Johnson, senior legal adviser at the EMF, says the impact of the proposals on offset was discussed and it gained a specific exemption.

She says: “We managed to achieve a recognition of offset mortgages. They will be outside of the ban because although they are two separate products – the mortgage and the savings account – when you put them together they are one single offering.

“The separate products would cease to exist if you didn’t tie them together and this was taken into account when the ban was decided.”

Aldermore Mortgages says it is not even considering the effect of the European mortgage directive and it will not stop product development as a result of the proposal.

Charles Haresnape, managing director of Aldermore Mortgages, says European proposals change regularly and implementation could be years away.

However, he says Aldermore’s 100% mortgage deal, which uses parental savings accounts as a guarantee, would be banned under the current proposals.

He adds: “No one can understand why they have come up with this policy so I can’t see it being in the final directive.

“These are good products serving a large portion of the country and there is nothing wrong with them. Until someone proves they are not appropriate, we are going to carry on developing them.

He says: “There is nothing in the UK that says they are inappropriate – it is only some bizarre proposal from Europe that has come out of left field.”


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