EU move could block UK regulation

UK mortgage regulation could be scrapped if draft proposals under the European Consumer Credit directive are adopted.

The UK mortgage industry faces an anxious wait to see whether all mortgage loans will be brought under the EC directive, currently beginning its passage into European law.

At the moment, secured lending falls outside the current proposals. But pundits say EU commissioners want it reined in. If that happens, it would effectively put a stop to UK mortgage regulation.

Leaked details of the draft directive reveal plans that would allow advisers to provide a new credit agreement every time capital is drawn down, whether for a further advance, second charge, car finance or for any other reason.

Kate Main, senior policy adviser at the Council of Mortgage Lenders, says: “We are concerned at how this has been drafted and how these plans may cut across what the government is trying to introduce at the moment. If we are faced with the prospect of dual regulation, we would feel the need to bang the drum for the FSA to drop its plans.”

She says that, without assurances that the directive – which would require advice to be given in every case, as well as removing lenders&#39 ability to offer flexible mortgages – will be amended, a directive coming into force after the FSA&#39s regulation date of October 2004 could “drive a coach and horses” through the new regime.

And Main adds that intermediaries will be legally bound to issue pre-application illustrations whether eventual regulation is done by the FSA or a European body.