The briefing paper is also supported by the British Bankers’ Association, the Building Societies Association, the Intermediary Mortgage Lenders Association and the Finance and Leasing Association.
The paper argues that responsible lending is already well established in Europe, reinforced both by the standards upheld by the European Mortgage Federation and long-standing regulatory requirements in national markets like the UK. The briefing paper, supporting the position of the UK government, calls for:
- A principles-based approach to regulation, acknowledging that there are significant differences between different European markets. An approach that avoids seeking to harmonise detailed rules is therefore more likely to deliver a better outcome for consumers.
- A proportionate approach, where the benefits for consumers are weighed against the cost and impact of introducing new regulatory requirements. Firms already face the additional cost of new rules on capital and liquidity, so the need for new conduct of business regulation in addition to prudential requirements should be carefully assessed.
- A balanced approach to the responsibilities of lenders and borrowers, recognising that ultimately the decision to borrow is the consumer’s.
UK representatives believe that European regulation should only extend to residential mortgages advanced to consumers. Buy-to-let loans, along with lending on properties providing a combination of residential and commercial use, should be excluded from the rules.
On proposals for disclosing information to consumers, it believes that the proposed directive should be scaled back and lenders already have to meet UK requirements for disclosing information, and European rules should mirror these obligations.
It believes that decisions about the availability and pricing of mortgages should be made by the lender, and not based on requirements to assess the creditworthiness of customers.